This document discusses production planning and factors that affect demand and production planning. It provides an example showing material quantities over time, including material in, processed, wasted, leftover, and available. Plant facilities production process, maintenance, and supply chain management impact production yields and performance. Finished goods demand seasonality and market factors are also important to consider in production and demand planning. The document emphasizes understanding the full production process cycle and related operational areas.

1. Industrial Engineering Management Systems Approach to the Enterprise Vision
L | C | LOGISTICS
ENTERPRISE SUPPLY CHAIN MANUFACTURING & COMMERCIAL LOGISTICS OPERATIONS ….
_____ _ PROCESS INNOVATION-OPTIMIZATION & ENGINEERING PROJECTS MANAGEMENT….
Industrial Engineering Management E-Book
INDUSTRIAL ENGINEERING MANAGEMENT FUNDAMENTALS AND HOW IT WORKS
January 2015
Expertise in Process Engineering Optimization Solutions & Industrial Engineering Projects Management
Supply Chain Manufacturing & DC Facilities Logistics Operations Planning Management
Chapter IV PRODUCTION PLANNING

2. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
Demand and Production Planning are directly related, and both affect each
other; when the demand is planned in excess of the production process in
place, or when it is planed short; materials or stocks on hand available will be
in excess or in shortage
Planning inventories both of raw materials and finished goods is complex, as it
depends on the production facility process in place
The ideal facility process should have zero breakdowns and or production
interruptions, which is almost impossible, that is why it is called ideal. Some
people will call it Excellence Operations; another word for ideal, but certainly
impossible to achieve in this century. Perhaps when Factories reach the level of
full automation

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PRODUCTION PLANNING
In the example below, it illustrates how over a period of time, there are
different production performances. See material in, material processed,
material left over from production, material wasted, and material available
for the next production cycle or working shift
The difference between material available and material in, is the excess
stocks on hand, or shortage, when the material left over from production is
zero
Notice that the plant facilities production process is the main contributor to
the production yields and performance rates

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PRODUCTION PLANNING
This includes all installed production machinery and equipment; the level of
reliability and technical skill of the maintenance engineering team and
technicians; the continuous and prompt response to a maintenance or repair
request, including materials supply, tools and spares required to keep the
machinery and equipment running in continuous operation.
Supply Chain Management plays a major role in the procurement, and can also
be a major bottleneck. Resulting in long production time down and continuous
machinery and equipment breakdowns due to lack of spare parts, and other
tools and equipment required

5. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING Another variable that plays an important role in the demand and production
planning is the finished goods demand seasonality, shipping lead time, market
positioning and competitiveness
That is why it is so important to understand the full production process cycle,
and all its related operational and support areas
See the following example that illustrates the above points
Material
Quantity In
Material qty
difference
Week of
Material
Available
Process
Raw
Material
Finished
Goods
Material
waste
Material
left over
360,187 27,181 23 to 26 July 375,187 348,006 221,457 13,481 13,700
437,888 45,345 28 Jul 02 Aug 451,588 406,243 242,209 45,345 0
556,225 57,919 04 to 09 Aug 556,225 498,306 366,682 57,919 0
402,592 22,278 11 to 16 Aug 402,592 380,314 245,261 22,278 -
713,734 42,870 18 to 23 Aug 713,734 670,864 439,074 12,870 30,000
749,905 51,969 25 to 30 Aug 779,905 727,936 482,416 13,470 38,500
769,297 67,922 01 to 06 Sep 807,797 739,875 492,196 30,922 37,000
747,859 54,334 08 to 13 Sep 784,859 730,525 479,480 29,334 25,000

6. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
Material
Quantity
In
Material qty
difference
Week of
Material
Available
Process
Raw
Material
Finished
Goods
Material
waste
Material
left over
833,945
15,476 15 to 20 Sep
858,945 843,469 551,723 15,476
-
901,647
31,011 22 to 27 Sep
901,647 870,636 643,334 23,012 7,999
925,117
11,126 29 Sep 04 Oct
933,116 921,990 614,936 11,127
-
1,092,540
46,487 06 to 11 Oct
1,092,540 1,046,053 522,584 38,487 8,000
1,080,009
67,698 13 to 18 Oct
1,088,009 1,020,311 770,186 22,698 45,000
882,400
143,449 20 to 25 Oct
927,400 783,951 705,401 80,449 63,000
1,104,100
99,508 27 Oct 01 Nov
1,167,100 1,067,592 533,345 66,508 33,000
1,000,632
48,375 03 to 08 Nov
1,033,632 985,257 492,212 48,375
-
Material
Quantity
In
Material qty
difference
Week of
Material
Available
Process
Raw
Material
Finished
Goods
Material
waste
Material
left over
833,945
15,476 15 to 20 Sep
858,945 843,469 551,723 15,476
-
901,647
31,011 22 to 27 Sep
901,647 870,636 643,334 23,012 7,999
925,117
11,126 29 Sep 04 Oct
933,116 921,990 614,936 11,127
-
1,092,540
46,487 06 to 11 Oct
1,092,540 1,046,053 522,584 38,487 8,000
1,080,009
67,698 13 to 18 Oct
1,088,009 1,020,311 770,186 22,698 45,000
882,400
143,449 20 to 25 Oct
927,400 783,951 705,401 80,449 63,000
1,104,100
99,508 27 Oct 01 Nov
1,167,100 1,067,592 533,345 66,508 33,000
1,000,632
48,375 03 to 08 Nov
1,033,632 985,257 492,212 48,375
-

7. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
When we study the process, we focus on the weighted moving average, weighted
moving standard deviation, weighted moving upper and lower limits, as well as the
weighted moving maximum and minimum value figures. Calculating the weighted
moving process

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PRODUCTION PLANNING
The value of the process tell us directly what is the %’s utilization of the total
capacity installed available; which can go between 60% to as high as 90% and
in some very particular installations up to 95%, with and average production
process performance between 76% to 86%
To calculate the plant facility production process performance, you need to
use a digital simulation model, probably in an excel spreadsheet. The will be
the topic for another module of this E-Book
In the meantime, observe the polynomial curve which plot the trend of the
production process performance, and the process range in regards to its
moving upper and lower process limits

9. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
18,298,847
Sum
18,700,246 17,269,509 11,117,062 1,044,340
-
173,604 47,733
std
162,981 145,846 139,897 93,847 15,105
Material
Quantity In
Material
Available
Material
Processed
Finished
Goods
Material
wasted
Material
left over
854,916 157,239
UPL
849,132 716,164 523,983 213,881 17,268
717,209 119,376
Wave
719,852 600,476 413,013 139,439 5,286
579,502 81,513
LL
590,571 484,787 302,043 64,997 -
706,675 120,066
process
714,604 609,189 431,349 152,491 9,690
938,317 181,900
max
938,317 844,322 675,734 300,196 37,000
432,900 60,993
min
469,900 408,907 260,309 56,995 -
Material
Quantity In
Material
Quantity In
Material
Available
Material
Processed
Finished
Goods
Material
wasted
Material
left over
21% process range 21% 19% 18% 21% 40% 78%

10. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING

11. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
Coming back to the level of stocks on hand or inventory level, observe the
effect of lacking demand and production planning, been reflected in the
available stocks vs. the processed stocks

12. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
You can also see that there is no correlation between wasted or defect
materials and left over and available material. It means that the policy of high
stocks to protect from waste is not related to the actual production or
processing of materials into finished goods

13. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
Another important aspect to consider during your production and demand
planning is the current production process yield, as tis is an indicator on how
the overall plant facilities and materials are doing, to contribute to the final
production of finished goods
In the example below, you can see that the production and target yield moves
continuously and that their trend ratio is not uniform; in fact their correlation
is not a fit one

14. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
In the example below, you can see that the production and target yield moves
continuously and that their trend ratio is not uniform; in fact their correlation is
not a fit one
Sept 2014 Oct-14 Nov-14 Dec-14 Jan-15
Production Yield 0.241 0.236 0.221 0.220 0.200
Target Yield 0.260 0.259 0.252 0.258 0.237
ratio 0.928 0.912 0.876 0.854 0.844
In your analysis, you have to determine the cause of the trend, and understand
the changes happening either within your materials, and or in combination with
your plant facilities process performance, as both will dictate the process yield
or production yield, as well as the production rates.
Both, affecting directly and immediately your demand and production planning

15. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
Below observe the example where materials of various sizes affect your
production rates and yield; and its distribution is an indicator of what you can
expect to achieve with the available materials in different sizes
frequency measurement %
1 32 0.43%
1 36 0.43%
2 38 0.85%
4 39 1.70%
7 40 2.98%
4 41 1.70%
8 42 3.40%
15 43 6.38%
12 44 5.11%
13 45 5.53%
24 46 10.21%
14 47 5.96%
20 48 8.51%
25 49 10.64%
25 59 10.64%
9 51 3.83%
15 52 6.38%
10 53 4.26%
6 54 2.55%
5 55 2.13%
5 56 2.13%
3 57 1.28%
2 59 0.85%
2 60 0.85%
1 61 0.43%
2 62 0.85%

16. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
In our example below you can also see that it is required to monitor the
trend of your production process yield as frequent as possible; perhaps daily
if you have the means and data
Production 200
Jan-15 yield ml
5 207
6 243
7 173
8 199
9 182
10 193
12 198
13 208
14 198

17. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
Below is data regarding the production yield from seven monthsLC
Yield
Plant
Yield
std 18 21
average 219 228
max 236 278
min 152 168
t 1.646 1.646
UL 225 235
LL 213 221
process 211 226

18. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
The next data is a random sampling or “photograph” of
the material size. So that we can use it to extrapolate it
with the current production yield
sample circumference
std 4.38
average 46.99
max 61.00
min 30.00
t 1.646
UL 47.31
LL 46.67
process 46.49
229.83
ml
substance

19. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
Substance circumference
std 2.91
average 46.64
max 57
min 43
t 1.708
UL 47.64
LL 45.64
process 47.76
236.09
ml
water

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PRODUCTION PLANNING
sample 502 material
circumference
std 4.38
average 46.99
max 61.00
min 30.00
t 1.646
UL 47.31
LL 46.67
process 46.49
229.83
ml
substance
Production
Yield
LC
Yield
Plant
Yield
std 18 21
average 219 228
max 236 278
min 152 168
t 1.646 1.646
UL 225 235
LL 213 221
process 211 226
Substance left in material
5600 gr
1.024 density
5468.75 ml
502 material
10.89
ml
substance
229.83 ml - 211 ml - 10.890 = 7.94 ml lost in process …… where ????....
LC Yield calculation
Container ml * No of containers production / [material left from yesterday + quantity In –
material left today]

21. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
In summary, if you do not have a proper demand and production plan in
place, the high risk of running high in over stocks or go into shortages of
stocks is only the result of lack of planning. The demand planning tools exist
and are available at least since the early 1960’s already over 50 year old;
nothing new or rocket science
Let’s now focus on the production system.
The brain of the entire production system, focus their activities on total
flexibility to pull-in, push-out or cancel materials from vendors in order to
respond fast to their non negotiable production changes required by
marketing-sales customers

22. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
The materials procurement planner and buyer analyst skills are based on a
back to back order and/or blank order, together with a weekly, daily, per
shift, product sequence order demand rolling forecast model
A sound MRP-I covering work in progress stocks from receiving, loading into
production lines, finished products, scraps, waste and ready to be loaded;
An MRP-II covering sanitation and engineering maintenance schedules,
production lines capacity availability, updated machines break down status
and availability status reports

23. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
Together with a sound policy on inventory turns, which will support a high
manufacturing planned yield, though great coordination is need to be carried out
between Quality Assurance, Quality Control, Sanitation, Engineering, Production
and Warehousing management
To be able to produce in full, and on time, with minimum wastes, scraps, at a high
level of production efficiency with balanced lines, minimum risk of product
contamination, and machines breakdown, it is required that accurate materials
usage ratios are calculated and analyzed at all times, as Bill of Materials ratios
unexpected changes makes the great difference, generating stocks excess or
shortages, the results are unfulfilled delivery orders
Machines production loading and actual production rates available need to be
measured continuously to be able to plan accurately on real production yields,
setting up realistic production schedules, and furthermore, the planning function
needs to coordinate sanitation and maintenance operations very tightly, together
with production and procurement planning schedules, or else major breakdown
and production available time down, contribute to production shortages

24. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
These tools are complemented by materials purchase orders status covering
Finished Goods demand Bill of Materials kits and computer real time stocks
on hand reports
A balance between buffer inventories’ cost of capital Vs transport cost is
required to support the continuous replenishment, there are situations
where the additional transport cost is less than the excess buffer inventory’s
cost of capital and this is the factor to decide quantities and schedule when
to ship materials from vendors
The buyer skills to negotiate and communicate directly with vendors is
important to get their immediate response and actions to match the
Enterprise manufacturing flexibility by implementing effectively purchase
orders pull-in, push-out and cancellations without charges or complains at
all

25. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
A major contribution to increase revenue gross margin is to get extended credit
terms to equal them as a consignment supply terms, and to continuously seek for
additional discounts, materials quality improvements without minimum quantities
or any other commercial contractual constraint, and with higher vendor materials
quality yields
Also the ability to get materials on consignment without any extra charges from
their best price obtained from vendors
Transportation efficiencies from traffic and warehousing operations contribute
directly to manufacturing operations and its work in process Finished Goods or WIP
Traffic control assures the in-flow of arriving materials and the out-flow of ready to
ship finished goods to warehouse or distribution center, reducing inventories
shortages

26. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
Transportation can be planned as a just in time delivery mode, with careful
estimation of the delivery window time; milk run transportation mode,
where efficiency is achieved in the loading and downloading operation,
containers stock control, and transportation time cycle;
there is also the cost per part delivery mode which focus on weight, quantity
and trips frequency to get the best utilization of the adequate truck size and
engine power
Warehouse efficiency assure the materials loading on time, accuracy and
WIP control as well as the stocks custody,
IQA police the in-bound materials quality yields consistency continuously
from all vendors as per BOM specifications, minimizing scraps within the
manufacturing operation cycle in all the production lines

27. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
The production planner analyst prepares the MRP-I Demand plan
requirements, based on MRP-II production capacity constraints, production
lines equipment maintenance engineering schedules and confirmation of on
time materials available from vendors and stocks
Working out production plans per working shift, to meet production lines
work orders, packaging and raw materials loadings schedules
Maintenance schedules are reported to production planner analyst
Finally the FG warehouse check on storage space constraints, and FG
forwarding traffic controller plans all transport requirements and schedules,
including transportation costs

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PRODUCTION PLANNING
Demand Plan
Process
Integrated Actual
Production Lines
Max/Optimal CAP
Demand
Statistics
Statistical
Forecast
Marketing
Events
schedule
Forecast
Delphi
Technique
Production
lines CAP
rates/sku
Related sku’s
Integrated BOM
Requirements
Max/Optimal CAP
Required
Materials
Planning
Inventory
Level
Required
Production
Lines
Layout
Integrated
Capacity
Analysis
Requirements
Schedule
Analysis
Vendor’s Materials
Requirements
Max/Optimal CAP
Commercial
Terms
Strategic
Alliance
Issues
SQA-IQA
Process
& Cost
Safety & JIT
Inventory
Transport
Cost
Analysis
Admin WH &
Transport
Operations
Cost Analysis
Integrated
Cost
strategy
Analysis
Integrated
Production
Master Plan
Optimal
Production
Master Plan
Production
schedule &
Production
Lines Balance
Material’s
BOM
Requirements
Planning
Materials
Inventory
Level
schedule
WH &
Transport
Throughput
Planning
Integrated
Manufacturing
& Materials
Operations
Cost Analysis
Demand Plan
CAP Production
Master Plan
Optimization
Demand
Production
Requirements
Production
Processes
Optimization
Production
Lines
Optimization
Materials
BOM
Requirements
Inventory
Optimization
Warehousing
Transportation
Optimization
Review Strategy for
Production CAP,
Inventories, Vendors,
Warehousing, Transport
Demand Plan
Forecast
Inventory
stock
on hand
Production
Master Plan
at Max/
Optimal CAP
Production
ERP-MRP
system
Outstanding
Inventory
and arriving
schedule
Demand Plan
Production
Master Plan
Vendors
Strategic
Alliance
Optimization
Issues
Simulation
Demand
Plan
variances
Simulation
Production
Master Plan
Variances
Simulation
Production
Schedule
Variances
Simulation
Production
Lines CAP
Variances
Simulation
Materials
Requirements
Plan
Variances
Simulation
Integrated mfg
& materials
operations
cost variances
Materials
ERP-MM
system
Integrated WH’s-DC &
Transport Actual CAP
Simulation
WH’s-DC &
Transoport
variances
About MRP-II and MRP-I

29. Systems Approach to the Enterprise Vision
Chapter IV
PRODUCTION PLANNING
Each production batch as in all processes has a start and an end of it,
with several steps to be followed either in parallel or in sequence order.
It all starts with the arrangement of direct bulk and indirect materials, or
components, mixing or assembling them to BOM or bill of materials
specifications accuracy
Followed by the packing of individual finished goods as per SKU’s
specifications
And then becoming WIP or work in process finish goods product, prior
to get them pack arranged in the best way to handle them and put them
away to storage for later delivery
Batch production is accomplished with restrictions based on equipment
CAPACITY or capacity available per batch volume, BOM processing
time, and required man-hours

30. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
MRP-II or manufacturing resources planning requires an accurate updated
data on the CAPACITY of each equipment involved in the batch production
process, its objective is to accomplish a production line time balance, with
minimum scraps or waste, equipment idle time, sub-inventories waiting
time, inventory queues, and minimum required man-hours
It is important that all this standard equipment CAP data are kept as accurate
as possible in order to obtain high yield on each production batch plan
When upgrading production line equipment CAP, is required that the BOM
processing time is reviewed as well, in order to keep the batch equipment
production line balanced

31. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
MRP-II is the tool used to keep the batch production line cycle time balanced
at all times during the production plan
Demand Plan tells the production planner what is required within a pre-
determined period of time
Then a master plan is to be elaborated to cover the given demand plan
period
The master plan is then the backbone of the production plan to detail, per
sku’s volume to be produced per day, per shift, per production line, per
sequence almost to the hour

32. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
MRP-I is the tool used to plan and distribute within a given demand period,
the master plan volumes per each sku’s
However, as simple as it is the concept and objectives of this tools; the
practical side of producing an MRP-II and MRP-I tool is rather complicated due
to the fact that there are 10’s or 100’s if not 1000’s of variables to be
considered, its interaction, linkage and multiple combinations available to
come up with the most optimal production plan
To make it even more complicated, there are parameters behaving with
constant values, but others within ranges still acceptable within the
equipment CAP

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PRODUCTION PLANNING
For instance, available over time, working days, manpower, equipment variable
production speeds per batch cycle per different sku
On the other hand these can also become the limitations such as no more
available over time, working days, production equipment speeds, and an
arrange of many other factors affecting the planning of production volumes
per sku
MRP-II and MRP-I take for a fact that materials, equipment and manpower
requirements are available, including energy, power and water among many
other HVAC and Plant Facilities supporting equipment and, another elements
required to make the sku’s production plan happen as per schedule

34. Systems Approach to the Enterprise Vision
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PRODUCTION PLANNING
A preliminary step towards the understanding of Enterprise
batch production cycles, is the need to study the process and
design a dynamic simulation sketch model of the production
In this way, you can shorten the time to go through the pain and
judgment of identifying variables and parameters, which are
critical to design, and building MRP-II and MRP-I tools

35. Industrial Engineering Management Systems Approach to the Enterprise Vision
L | C | LOGISTICS
ENTERPRISE SUPPLY CHAIN MANUFACTURING & COMMERCIAL LOGISTICS OPERATIONS ….
_____ _ PROCESS INNOVATION-OPTIMIZATION & ENGINEERING PROJECTS MANAGEMENT….
Industrial Engineering Management E-Book
INDUSTRIAL ENGINEERING MANAGEMENT FUNDAMENTALS AND HOW IT WORKS
January 2015
Expertise in Process Engineering Optimization Solutions & Industrial Engineering Projects Management
Supply Chain Manufacturing & DC Facilities Logistics Operations Planning Management
THANK YOU
Chapter IV PRODUCTION PLANNING