MANUFACTURING PLANNING AND CONTROL (MPC)

MANUFACTURING PLANNING AND CONTROL (MPC)

An Overview of MPC system:

MPC systems concerns planning and controlling all aspects of manufacturing, including managing materials, scheduling machines and people, and coordinating suppliers and key customers

Both the MPC system and manufacturing process are designed to meet the dictates of the marketplace and to support overall company strategy

An effective MPC system can provide substantial competitive advantage for a company in its marketplace

Basically the MPC system provides information to effectively manage the flow of material, effectively utilize people and equipment, and coordinate supply chains

It provides to managers with information to make intelligent decisions

MPC system need to continuously adapt and respond to changes in the company environment, strategy, customer requirements, particular problems, and new supply chain opportunities

Firms to be an effective competitor must have MPC systems with the ability to determine, transmit, revise, and coordinate requirements throughout a global supply chain system

Typical MPC Support Tasks

Plan capacity requirements and availability to meet marketplace needs

Plan for material to arrive on time in the right quantities needed for product production

Ensure utilization of capital equipments and other facilities is appropriate

Maintain appropriate inventories of raw materials, work in process, and finished goods in correct locations

Schedule production activities so people and equipments are working on the correct things

Track material, people, customers orders, equipment, and other resources in the factory

Communicate with customers and suppliers on specific issues and long-term relationships

Meet customer requirements in a dynamic environment that may be difficult to anticipate

Respond when things go wrong and unexpected problems arise

Provide information to other functions on the physical and financial implications of the manufacturing activities

MPC System Payoffs

Symptoms of poor MPC system are:

Poor customer service, excessive inventories, inappropriate equipment or worker utilization, high rate of part obsolescence, lack of responsiveness to changes in the business environment, and large number of expeditors dedicated to fire fighting.Managing the Manufacturing Process

What are the manufacturing process stages?

What are the management concerns with each stage?

Manufacturing process: -

Physical flow is quite universal

Specific differences between firms must be taken into account

Differences:

Production process vast differences among different types of production processes

Four broad classes are job shop, batch production, mass production, and continuous flow process

Types of Plant Configurations

Job shop

Wide range products are manufactured (quantity usually small)

Parts are routed to work centres depending on the production steps required

Manufacture customised product

Job shops are typically inefficient and have long lead times, large work-in-process inventory, and high costs

Major performance criterion is utilisation of equipments

Eg:- Special purpose machine tools, Commercial printer, Boilers, etc

Batch production

Involves the manufacture of medium-size lots of the same item or product

The lots may be produced only once or they may be produced at regular intervals

Lot sizes and the frequency of production of a single item are tied up with the inventory control policies adopted by marketing

Product demand characteristics may lead to different kind of production management especially production control

Usually the products produced in a batch production have somewhat-continuous demand

But the production rate is usually higher than the demand rate and hence batch production method is traditionally adopted

The items that goes into the final products generally standardised

Such production of standardised items on a continuous basis is called repetitive production For repetitive production, demand does not have to be large, just stable enough so that final assembly schedule can be smoothed (ie, have relatively level daily production output)

To achieve stability and enable levelled production scheduling, some organisation combine production of different version of products that were formerly produced separately

Combining production of different products is feasible as long as product differences are add-on features or options and not differences in fundamental design, major components or production processes

Grouping different items usually resulted in a particular way of configuring the system for achieving the better operational efficiency and control

Such configuration is called cellular manufacturing or group layout

Mass production

Continuous specialised manufacture of identical products High-volume production lines are characterised by very high production rates and narrow scope One or a few products travel through a set of fabrication activities specially arranged for the particular products (The entire plant is designed and operated for manufacture of a single product type) The equipment is dedicated to the manufacture of a single product type such as automobile, light bulbs, appliances A very high fixed investment is required for one-of-a-kind specialisation of production facilities, such as fixed transfer lines, dedicated conveyors, buffers, etc Each piece of equipment is optimised in terms of cost and time for the operation it performs and material movement is automatedContinuous flow process

Continuous dedicated production of large amounts of bulk product Product types are few and volumes are high Continuous flow material through a serious of sequential operations Eg:- chemical plants, oil refineries, plastics, iron and steel, and textile industriesA system configuration suitable for the competitive environment where low to mid volume production is called Flexible Manufacturing Systems (FMS)

Flexible Manufacturing Systems (FMS)

Automated transfer lines were installed in automobile and other industries for mass production. Such systems, although economical, lack flexibility They would be choice configuration for steady markets The small-batch production and custom-made products that accounts for 75 % of total number of work pieces are essentially manufactured in job shops These shops are inefficient in machine utilisation and have large manufacturing lead times FMS have evolved as a solution to efficient mid-volume production of a variety of part types with low set-up time, low work-in-process inventory, short manufacturing lead time, high machine utilisation, and high quality Capability to maintain competitive production of a variety of part types in low-to mid-volume ranges, in the face of design, demand, and part mix changes, and machine and tool failuresAnother kind of difference

Distinguished as make to order, assemble to order and make to stock

Make to order - Manufacture each customer order on a unique basis

Assemble to order assemble a wide variety of finished goods from a smaller set of standardised options

Needs careful integration of actual customer orders with option planning and final assembly

Make to stock produces goods to replenish inventory

Finished goods inventories are used to separate the assembly process from customer orders

Still another difference

Complexity of component part fabrication and assembly

Some firms do little internal fabrication, purchasing most of their component parts prior to assembly

This is true especially in the current outsourcing scenario

Outsourcing is the term used to describe when a firm purchases material, assemblies, and other services that were initially done within company, from sources outside the company

Outsourcing allows a firm to focus on activities that represent its core competencies

Thus the company can create a competitive advantage while reducing cost

The coordination of outsourcing activities is typically carried out by materials/logistic management

Materials/logistic management refers to the grouping of management functions that support the complete cycle of material flow, from the purchase and internal control of production materials; to the planning and control of work-in-process; to the shipping, and distribution of finished goods

Others with extensive machining and other conversion processes, have significantly more complex component part fabrication activities

Some firms makes relatively few products with dozens of components parts; assemble hundreds of end items made from thousands of component parts

Yet another difference

Push/Pull Systems

Based on the timing of the production operation relative to customer demand the manufacturing system can be classified as push or pull systems

Push System

Materials are processed in batches according to a schedule for each workstation, then moved (pushed) downstream to the next workstation where they processed according to anther schedule

The materials must usually wait until the workstation completes earlier jobs, changes over, and is ready to process them

In a factory that produces many kinds of product with different routing sequences and demand rates, the wait can be unpredictable

As a result, the schedules are substantially padded to offset the waiting time uncertainty and to account for material shortages, machine breakdowns, and so on

This uncertainty and consequential padding of schedules leads to long lead times, high variability in lead times, and large in process inventories

In push process execution is initiated in anticipation of customer orders

At execution demand is not known and must be forecasted

It is a speculative process

Pull System

Consumer withdraws whatever material is needed from stock, and when the amount in stock reaches some minimum level, that signals the producer at the upstream location to replenish it

The producer then makes or procures the material in some prespecified quantity and puts it into stock

In pull production, detailed production schedules for every operations are eliminated

Immediate decisions about quantities and timing of work are made by workers using a simple signal system that connects operations throughout the process

The charm of the system is that with relatively little inventory and only minimal information requirements, the system keeps material flowing to meet demand

In pull process execution is initiated in response to a customer order

At execution demand is known

It is a reactive process

It is suitable for repetitive production environment

Sometimes called stockless production

Also called Just-in-time production because it seeks to have every stage in process produce and deliver materials downstream in the exact quantities and at the exact times requested

Desirable Characteristics of Production Systems

Flexibility is the ability of the system to respond effectively to change

Responsiveness Rapid response to customer request

Product variety

Product quality

Mass customisation implies flexibility to produce a variety of products to meet increasing customer demands and flexibility of process to meet whatever volume responsiveness is required

Affordable cost product cost and transaction cost

Better service

Lower inventories

Concerns associated with manufacturing stages are: -

Management problems

Techniques and systems

The data base

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

StageABCDE

Example management

ProblemsHow to monitor vendor performanceHow to maintain accurate raw material recordsHow to schedule component item productionHow to determine component item requirementsHow to schedule final assembly

Techniques and systemsVendor scheduling proceduresCycle counting techniquesShop-floor control systemsMaterial requirements planning(MRP) systemsMaster production scheduling(MPS) systems

Database elementsPurchase ordersInventory recordsPart routingsBill of materialOpen customer orders

FGHIJ

How to estimate end- item demand for each productHow to move material to distribution centersHow much and when to orderHow to choose transportation modesHow to meet customer needs

Exponential smoothing forecasting proceduresVehicle loading proceduresIndependent demand based inventory proceduresInventory/tran-sportation trade-off techniquesDistribution requirement planning (DRP) systems

Sales order historyShipping costsPlanned shipmentsTransportation costsCustomer ordering patterns

Techniques and systems:

Nature of management problems

Infrequent eg. Determining distribution centres

Frequent (routine) eg. Majority of production and inventory decisions component part planning, establishing priorities for unfinished work, etc.

The managerial issue are how to

Design the system

Provide the data

Set the decision rules

Implement the system

Monitor system and

Make improvement- it comes from better

Techniques

Integration of material flow

Data (accurate and pertinent)

The data base:

Techniques or systems rely on basic information eg. A large job shop machine scheduling system

The complexity of MPC problems are mainly due to the enormity of underlying database required to properly support routine decision making system eg. A firm requires 5 million individual pieces of data to be accurately maintained and accessed to support a component part planning system.

A well-formulated system must be driven by data that are appropriate, consistent and accurate.

The data must be managed like any other resource and this might necessitate major changes in thinking, habits and procedures.

The data base integrity must be maintained with common definitions of terms, procedure for processing detailed transactions, clear assignment of organisational responsibility for each data base subsection and company wide commitment to maintain the integrity of each data base element.

AN MPC SYSTEM FRAMEWORK

MPC system encompasses 3 distinctive aspects or phases

Creating the overall manufacturing plan for the manufacturing part of the company

Detailed planning of material flows and the capacity to support the overall plan

Execution of these plans in terms of detailed shop scheduling and purchasing actions.

This is in line with the decision-making framework that recognises the natural hierarchy of production decisions

A Framework for Production Decision Making

Decision framework

Managerial decision making a broader perspective; identifies a hierarchy of interconnected decisions

Operational level decision coordination for smooth flow of materials between stages in a multistage process

Hierarchy of Managerial Decision

Strategic planning, tactical planning, and operational control The hierarchy of decisions applied to production function is given the table below

Category of ActivityStrategicTacticalOperational

General types of decisionsPlans for acquisition of resourcesPlans for utilisation of resourcesDetailed execution of schedules

Managerial levelsTop MiddleLow

Time horizonLong (2+years)6 to 24 monthsShort range

Level of detailVery aggregatedAggregatedVery detailed

Degree of uncertaintyHighMediumLow

Examples of variables under control of managementProducts to sell; which dimensions to compete; size and location of facilities; nature of equipment (e.g. general purpose VS specialised); long-term raw material and energy contracts; labour skills needed; nature of production planning and inventory management decision systemsOperation hours of plants; work force sizes; inventory levels; subcontracting levels; output rates; transportation modes usedWhat to produce (procure), when, on what machine (from which vendor), in what quantity, and in what order; order processing and follow-up; material control

Integration at the Operational Level

It is necessary to ensure at the operational level the proper coordination of input streams of the various raw materials, components, subassemblies, and so forth

There should be a coordination of action back through all the stages of distribution from the ultimate customer to the interface with production

A single general framework for planning and scheduling within a production environment is shown in the figure below

Manufacturing Planning and Control System

It embraces the hierarchy of decisions as well as integration at the operational level

The framework is suitable for Closed Loop Material Requirement Planning. A more complete system is known as Manufacturing Resource Planning (MRP II)

It is also consistent with the Enterprise Resource Planning (ERP) framework

MRP is a material planning and scheduling system for components, parts, subassemblies and raw materials

Closed loop MRP can creates better plans compared to MRP as the system considers feed back information in creating realistic plans and dynamic priority setting rule in scheduling

MRP II converts a number of the outputs of production planning and control into financial terms e.g.- Inventories in rupees, labour budget, shipping budget, standard hours of output in rupees, vendor rupee commitment, etc.

ERP system can be considered a direct extension of MRP

MRP logic is used in the production module of ERP

Under ERP the entire firm operates from the same data

ERP system allows for integrated planning across the functional areas in a firm

Enterprise Resource Planning (ERP)

Evolution Towards ERP

The focus of manufacturing system in the 1960s was on inventory control

Techniques of the day focused on the most efficient way to manage large volumes of inventory

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

In the 1970s, it became increasingly clear that companies could no longer afford to the luxury of maintaining large quantities of inventory led to introduction of Material Requirement Planning (MRP) systems

For the first time, using a Master Production Schedule (MPS), supported by bill of material files that identified the specific material needed to produce each finished item, a computer could be used to calculate gross requirements

Using accurate inventory record files, the available quantity on hand and scheduled receipts of material determined net material requirements

This then prompted an activity such as placing an order, cancelling an existing order or modifying the timing of existing orders

For the first time in manufacturing, there was a formal mechanism for keeping priorities valid in a changing manufacturing environment

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

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

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

Tools were developed to support the planning of aggregate sales and production levels, the development of build schedule, forecasting, sales planning and customer order promising and high level resource analysis

Scheduling techniques for the factory floor and supplier scheduling were incorporated into the MRP systems

When this occurred, users began to consider their systems as company-wide systems

The resultant system is known as closed-loop MRP

In the 1980s, companies began to take advantage of the increased power and affordability of available technology and were able to couple the movement of inventory with the financial activity

This led to the development of a more integrated system which incorporated the financial accounting system and the financial management system along with the manufacturing and materials management systems

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

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

By early 1990s, continuing improvements in technology allowed MRP II to be expanded to incorporate all resources planning for the entire enterprise

Areas such as product design, information warehousing, materials planning, capacity planning, communication systems, human resources, finance, and project management could now be included in the new system

The term, ERP was coined for such systems

ERP can be used not only in manufacturing firms, but in any company that wants to enhance competitiveness by most effectively using all its assets, including information

Why ERP

Companies today face the challenge of increasing competition, expanding markets, and rising customer expectations

This increases the pressure on companies to lower total costs in the entire supply chain, shorten throughput times, drastically reduce inventories, expand product choice, provide more reliable delivery dates, and efficiently coordinate global demand, supply, and production

As the business world moves ever closer to a completely collaborative model and competitors upgrade their capabilities, to remain competitive organisations must improve their own business practices and procedures

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

Functions within the company must upgrade their capability to generate and communicate timely and accurate information

To accomplish these objectives, companies are increasingly turning to ERP

ERP provides two major benefits that do not exist in non-integrated departmental systems:

(i) a unified enterprise view of the business that encompasses all functions and departments; and

(ii) an enterprise database where all business transactions are entered, recorded, processed, monitored, and reported

ERP Defined

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

Its strength stems from its ability to provide a comprehensive business functionality in an integrated way using a state-of-the-art IT infrastructure

ERP systems typically are very efficient at handling the many transactions that document the activities of a company

One significant feature of ERP software is that

Core corporate activities, such as manufacturing, human resources, finance, and supply chain management are automated and

Improved considerably by incorporating best practices,

So as to facilitate greater managerial control, speedy decision making and huge reduction of business operational cost

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

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

ERP system should not be looked as simply as tools that have a fixed and measurable output, but rather as a technological infrastructure designed to support the capability of all other tools and processes used by a firm

ERP systems represent corporate infrastructure, much the same way that physical high way systems do

ERP systems are designed to integrate business functions so that real-time resource accountability across all business units and facilities of a corporation could be maintained

The objectives of the ERP could include elimination of conflicting information, the reduction in data redundancy, standardisation of business unit interfaces, global access and security

ERP implementation results in significant benefits produced from the integrated nature of the system as well as from reengineering business process and the change in business culture

ERP supports coordinated planning and execution across functional areas

Companies motivation for ERP implementation could be classified into two groups

Technological and Operational

Technological Drivers

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

Operational Drivers

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

View point on ERP by Managers, and Information Technology Community

Managers

ERP represents a comprehensive software approach to support decisions concurrent with planning and controlling the business

Focus is more on the potential impact of ERP on the performance of various business functions

ERP, with the emphasis on planning, is designed to allow much tighter integration, thus eliminating the problem of local optimisation

Manufacturing industry experts describe ERP as:

An enterprise-wide set of management tools that helps balance demand and supply

Containing the ability to link customers and suppliers into a complete supply chain

Employing proven business process for decision making

Providing high degree of cross functional integration among sales, marketing, manufacturing, operations, logistics, purchasing, finance, new product development, and human resource

Enabling people to run their business with high level of customer service, responsiveness and productivity, and simultaneously lower costs and inventories, and providing the foundation for effective e-commerce

Information Technology Community

ERP is a term to describe a software system that integrates application programs in finance, manufacturing, logistics, sales and marketing, human resources, and other functions in a firm

Focus is on the intricacies of package and process design to meet conceptual objectives

ERP benefits can be classified into five groups

Operational

Relating to cost reduction, cycle time reduction, productivity improvement, quality improvement, and customer service improvement

Managerial

Relating to better resource management, improved decision making and planning, and performance improvement

Strategic

Concerning business growth, supporting business alliance, building business innovations, building cost leadership, generating product differentiation, and building external linkages

IT Infrastructure

Involving building business flexibility, IT cost reduction, and increased IT infrastructure capability

Organisational

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

Software Imperatives

Multifunctional in scope: - Ability to track financial results in monetary terms, procurement activity in unit of material, sales in terms of product units and services, and manufacturing or conversion process in units of resource or people

Excellent ERP software produces results closely related to the need of people for their day-to-day work

Integration:- When transaction or piece of data representing an activity of the business is entered by one of the functions, data regarding the other related function is changed as well

This eliminates the need for reposting data to the system

Modular in Structure:- The software can be combined into a single expansive system, narrowly focused on a single function, or connected with software from another source/application

Facilitate classic manufacturing planning and control activities:- Forecasting, production planning, inventory control

Routine Decision Making VS Transaction Processing

Transaction Processing

Transaction processing relates to the posting and tracking of the activities that document the business

Example

When an item is purchased from a vendor a specific sequence of activities occurs

Solicitation of the offer, acceptance of the offer, delivery of goods, storage in inventory, and payment for the purchase are all activities that occur as a result of the purchase

The efficient handling of the transactions as goods move through each step of the production process is the primary goal of an ERP system

Decision Support System

Relate to how well the system helps the user make intelligent judgement about how to run the business

Example

With respect to the manufacturing planning and control, decision concerning the amount to purchase, the selection of vendor and how it should be delivered need to determined

An ERP system with decision logic based parameters set in the system can assist the managers to take appropriate decision

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

Manual or Automated

Predictable

Procedures

Tightly defined and consistent

Policies

Routine decisions

Back End

Shop-floor Control Systems

Purchasing Systems

Engine

Detailed Capacity Planning

Material and Capacity Plans

Material Requirement Planning (MRP)

Front End

Demand Planning

Master Production Schedule

Production planning

Raw material inventories

Component-part inventories

Purchasing

Fabrication

Assembly

Product Variety

Production Volume

Continuous Flow

Process

Mass Production

Job Shop

Production

Batch Production

Vendors

Transport

Distribution centers

Transport

Field warehouses

Field warehouses

embly

Ass-

Customers

Finished-goods Inventories

PAGE 17MPC Introduction