UNIT 1

INTRODUCTION TO PRODUCTION PLANNING AND CONTROL

Introduction

Production function is that part of an organization, which is concerned with the

transformation of a range of inputs into the required outputs (products) having the requisite
quality level. Production may be understood as ―the step-by-step conversion of one form of
material into another form through chemical or mechanical process to create or enhance the
utility of the product to the user. Thus production is a value addition process.

In any manufacturing enterprise, the main objective of production department is to produce

the things in desired quantity at desired time so that they may be made available to end
users when they demand it. Production, being a very complex process is very difficult to
manage for the people. This includes a large number of activities and operations which need
to be planned appropriately and in turn controlled for the effective production of the output.
The main purpose of production planning and control (PPC) is to establish routes and
schedules for the work that will ensure the optimum utilization of materials, workers, and
machines and to provide the means for ensuring the operation of the plant in accordance
with these plans.

There are different types of production systems. The choice of production system depends
upon the nature of products, variety of products and volume of products. These production
systems have been discussed in this chapter in detail. Entrepreneurs, after finalizing the
production system to be used are required to go for the production planning and control
(PPC) which essentially depends upon the type of production system.

Production planning and control is necessarily concerned with implementing the plans, i.e.
the detailed scheduling of jobs, assigning of workloads to machines (and people), the
actual flow of work through the system. Production is an organized activity of
converting row materials into useful products. Production system requires the optimal
utilization of natural resources like men, money, machine, materials and time. Production
planning and control coordinate with different departments: such as production,

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marketing, logistics, warehouse and other departments depending upon the nature of
organization. Production planning and control receives data related to orders from
marketing departments. Production plan based on marketing and production data is prepared
in production planning and control. This production plan provides clear idea about
utilization of manufacturing resources for production. Prepared production plan is delivered
to production department. Production department manufacture products according to that
plan.

The ultimate objective of production planning and control, like that of all other
manufacturing controls, is to contribute to the profits of the enterprise. As with inventory
management and control, this is accomplished by keeping the customers satisfied through
the meeting of delivery schedules.

The main objectives of PPC may be summarized as followings:-

a) It is used to establish target and check the deviations by comparing on some

performance measures.
b) Decides the nature and magnitude of different input factors to produce the output.
c) Coordinates different resources of production system in the most effective and
economic manner and to coordinate among different departments.
d) Elimination of bottleneck
e) Utilization of inventory in the optimal way
f) Smooth flow of material
g) To produce in right quantity and quality at right time
h) Scheduling production activities to meet delivery schedule
i) Expediting the system under production
j) To ensure flexibility in production system to accommodate changes and uncertainty
k) Optimizes the use of resources for minimum overall production cost
l) To ensure the production of right product at right time in right quantity with
specification rightly suited to customers
m) Stable production system, with least chaos, confusion and undue hurry.

This chapter deals in detail with the concept of production planning and control. This will
help the students to understand the PPC to be used for the different types of production
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 systems along with their merits and demerits. This will also make them familiar with
various constraints in PPC.

Meaning of Production
As discussed earlier, production refers to the transformation of inputs into finished goods/
or creation of services in order to satisfy the customer needs. This uses different inputs
mainly including 6M‘s namely, man, material, machine, money, method and management.
Production involves application of processes by which the inputs can be transformed into
desired product (output) of potential utility while improving properties and adding
economic values through the best method without compromising on quality.

Different forms of production based on the processes used:

1. Production by extraction or separation: like petrol, kerosene, sugar etc

2. Production by assembly: car, television, furniture

Edwood Buffa defines production as ―a process by which goods and services are created‖
Some examples of production are: manufacturing custom-made products like, boilers with a
specific capacity, constructing flats, some structural fabrication works for selected
customers etc. At each stage of processing, there will be value addition. It is easy to
understand a production system from the figure 1.1. There are various inputs which
essentially pass through a transformation/ conversion process and finally converted into
some outputs which have a value for the end users.

The outputs may be in the form of tangible products or services. In nutshell, production
system of an organization is that part, which produces products of an organization. It is that
activity whereby resources, flowing within a defined system, are combined and transformed
in a controlled manner to add value in accordance with the policies communicated by
management. A simplified production system is shown above.

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Production management involves the managerial decisions regarding design of the product
and design of the production system i.e. determination of production processes and
production planning and control.

Blueprint of Production system

An enterprise in the beginning needs to define its production system that is considered as
the framework within which all production related activities and operations take place.
Manufacturing process is the transformation process through which inputs are converted
into outputs. An appropriate designing of production system ensures the coordination of
various production activities and operations. There is no single pattern of production system
which is universally applicable in all kinds of enterprises. This varies from one enterprise to
another depending upon many parameters.

Types of Production systems

There are mainly three types of production systems mentioned as below:

(1) Continuous/Mass production

(2) Job or unit production
(3) Intermittent/Batch production

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(1) Continuous/Mass production: It is used when we need to produce standardized
products with a standard set of process and operation sequence in anticipation of
demand. This ensures continuous production of output. It is also termed as mass flow
production or assembly line production. This system results in less work in process
(wip) inventory and high product quality but involves high capital investment in
machinery and equipment. This ensures very high rate of production as we need not to
intervene once the production has begun. The system is appropriate in plants where
large volume of small variety of output is produced. e.g. oil refineries, cement
manufacturing and sugar factory etc.

Characteristics of Continuous/Mass production:

a) As same product is manufactured for sufficiently long time, machines can be laid
down in order of processing sequence.
b) Standard methods and machines are used during part manufacture.
c) Most of the equipment‘s are semi automatic or automatic in nature.
d) Material handling is also automatic (such as conveyors).
e) Semi-skilled workers are normally employed as most of the facilities are automatic.
f) As product flows along a pre-defined line, planning and control of the system is
much easier.
g) Cost of production per unit is very low owing to the high rate of production.
h) In process inventories are low as production scheduling is simple and can be
implemented with ease.

(2) Job or Unit production: It involves production as per customer's specifications. This
ensures the simultaneous production of large number of batches/orders. Each batch or
order comprises of a small lot of identical products and is different from other batches.
It requires comparatively smaller investment in machines and equipment. It is flexible
and can be adapted to changes in product design and order size without much
inconvenience. This system is most suitable where heterogeneous products are produced
against specific orders. In this system products are made to satisfy a specific order.

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 However that order may be produced- only once or at irregular time intervals as and
when new order arrives or at regular time intervals to satisfy a continuous demand.

Characteristics of Job or Unit Production:

a) Machines and methods employed should be general purpose as product changes

are quite frequent.
b) Man power should be skilled enough to deal with changing work conditions.
c) Schedules are actually nonexistent in this system as no definite data is available on
the product. In process inventory will usually be high as accurate plans and
schedules do not exist.
d) Product cost is normally high because of high material and labor costs.
e) Grouping of machines is done on functional basis (i.e. as lathe section, milling
section etc.) This system is very flexible as management has to manufacture
varying product types. Material handling systems are also flexible to meet changing
product requirements.

(3) Intermittent/Batch Production: This is concerned with the production of different

types of products in small quantities usually termed as batches. A batch contains the
similar products but in small quantity. This is used to meet a specific order or to meet a
continuous demand. Batch can be manufactured either- only once or repeatedly at
irregular time intervals as and when demand arise or repeatedly at regular time intervals
to satisfy a continuous demand. Under this system the goods may be produced partly for
inventory and partly for customer's orders. For example, components are made for
inventory but they are combined differently for different customers. e.g. automobile
plants, printing presses, electrical goods plant are examples of this type of
manufacturing.

Characteristics of Intermittent/ Batch Production:

a) As final product is somewhat standard and manufactured in batches, economy of

scale can be availed to some extent.
b) Machines are grouped on functional basis similar to the job shop manufacturing.

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 c) Semi-automatic, special purpose automatic machines are generally used to take
advantage of the similarity among the products.
d) Labor should be skilled enough to work upon different product batches.
e) In process inventory is usually high owing to the type of layout and material
handling policies adopted.
f) Semi-automatic material handling systems are most appropriate in conjunction with
the semi-automatic machines.

In addition to the above, a large number of manufacturing plants include both intermittent
and continuous processes and are classified as composite or combination operations .Such a
plant may have sub assembly departments making parts in a continuous operation, while the
final assembly department works on an intermittent basis.(as in the furniture and custom
packaging industries)

Types of Manufacturing Processes

The above mentioned production systems require different types of manufacturing process
and require different conditions for their working. Selection of manufacturing process is a
strategic decision as any change in the same is very costly and time consuming affair.
Therefore the manufacturing process is selected at the stage of planning a business venture.
This must be selected keeping in view two important parameters (1) meeting the
specification of the final product and (2) to be cost effective.

The manufacturing process is classified into four types.

(i) Jobbing manufacturing process

(ii) Batch manufacturing process
(iii) Mass or flow manufacturing process
(iv) Process type manufacturing process

(i) Jobbing manufacturing process: This is used to produce one or few units of the
products as per the requirement and specification of the customer. Production is to
meet the delivery schedule and costs are fixed prior to the contract made with the
customer.

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(ii) Batch manufacturing process: This is used to produce limited quantities of each
of the different types of products in the form of batches. These batches of different
products are manufactured on same set of machines. Different batches/products are
produced separately one after the other.
(iii) Mass or flow manufacturing process: This is used to produce a large quantity of
same product at a time that is stocked for sale. All machines and required
equipments are arranged according to the sequence of operations; termed as line
arrangement/flow. This ensures very high rate of production. One line arrangement
can produce only one type of product, therefore, a different line arrangement is
needed for a different product.
(iv) Process type manufacturing process: This is used to produce the products which
need a particular process/definite sequence of operations. E.g. petroleum. In this,
production run is conducted for an indefinite period.

Factors affecting the Choice of Manufacturing Process

Following factors need to be considered before making a choice of manufacturing process.

a) Effect of volume/variety: This is one of the major considerations in selection of

manufacturing process. When the volume is low and variety is high, intermittent process is
most suitable and with increase in volume and reduction in variety continuous process
become suitable. The following figure indicates the choice of manufacturing process as a
function of volume and variety.

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b) Capacity of the plant: Predicted sales volume is the key factor to make a choice
between batch and line process. In case of line process, fixed costs are substantially higher
than variable costs. The reverse is true for batch process thus at low volume it would be
cheaper to install and maintain a batch process and line process becomes economical at
higher volumes.
c) Lead time: The continuous process normally results faster deliveries as compared to
batch process. Therefore lead-time and level of competition certainly influence the choice of
production process.
d) Flexibility and Efficiency: The manufacturing process needs to be flexible enough to
adapt contemplated changes and volume of production should be large enough to lower
costs.

Hence it is very important for entrepreneur to consider all above mentioned factors before
taking a decision pertaining to the type of manufacturing process to be adopted. As far as
Small Scale Enterprises are concerned, they usually adopt batch processes due to less
volume of production and low investment.

Once the entrepreneur has made a final choice pertaining to the product design, production
system and process, his next critical decision is the production and planning control (PPC)
decision.

Meaning of Production Planning and Control:

PPC is a very critical decision which is necessarily required to ensure an efficient and
economical production. Planned production is an important feature of any manufacturing
industry. Production planning and control (PPC) is a tool to coordinate and integrate the
entire manufacturing activities in a production system. This essentially comprises of
planning production before actual production activities start and then exercising control
over those activities sto ensure that the planned production is realized in terms of
quantity, quality, delivery schedule and cost of production.

According to Gorden and Carson, PPC usually involve the organization and planning of
manufacturing process. Principally, it includes entire organization. The various activities
involved in production planning are designing the product, determining the equipment

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and capacity requirement, designing the layout of physical facilities and material and
material handling system, determining the sequence of operations and the nature of the
operations to be performed along with time requirements and specifying certain
production and quantity and quality levels.

Production planning also includes the plans of routing, scheduling, dispatching

inspection, and coordination, control of materials, methods machines, tools and
operating times. Its ultimate objective is the to plan and control the supply and
movement of materials and labour, machines utilization and related activities, in order to
bring about the desired manufacturing results in terms of quality, quantity, time and
place. This provides a physical system together with a set of operating guidelines for
efficient conversion of raw materials, human skills and other inputs to finished product.

Procedure of Production Planning and Control

The PPC is entirely based on the pre-design format. It attempts to execute and implement
all activities/operations according to the set plan. All operations should be executed in a
proper manner with a close vigil on all facts ensuring that the time period and the
stipulated costs should not go beyond the reach and it should be done under the
excepted/agreed policies. These costs are including the cost of assets, capital cost of the
facility, and labour. The PPC consists of the following steps.

a) Forecasting the demands of the customers for the products and services.
b) In advance preparing the production budget.
c) Design the facility layout.
d) Specify the types of machines and equipment.
e) Appropriate production requirements of the raw materials, labour, and machinery.
f) Drawing the apt schedule of the production.
g) Confirming the shortage or any excess of the end product.
h) Future plans are drawn for any sudden surge in the demand for the product.
i) The rate and scale of production is setup. Which needs to be broken into realistic
time periods and scheduling. The specified job needs to be done in the amount of
time provided so that the production can move to next step.

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PPC essentially consists of three Stages:

a) Planning stage
b) Action stage
c) Monitoring stage

All these three stages are very important from the point of view to production because
without planning no production work can take off at all. The foremost thing which is
required for any production is a proper planning.

Elements of Production Planning and Control

This is important to note that production plan is the first and the foremost element of
PPC. Planning refers to deciding in advance what is to be done in future. A separate
planning department is established in the organization which is responsible for the
preparation of policies and plans with regard to production to be undertaken in due
course. The planning department prepares various charts, manuals production budgets
etc., on the basis of information received from management. These plans and charts or
production budgets are given practical shape by carrying various elements under
production control. If production planning is defective, production control is bound to be
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adversely affected. For achieving the production targets, production planning provides
sound basis for production control.

One needs to remember that production plans are prepared in advance at top level
whereas, production control is exercised at machine shop floor (bottom level) where
actual production is taking place. Some important elements of PPC have been depicted
in the figure as below:

The important elements may be listed as following:

1. Materials: planning for procurement of raw material, component and spare parts
in the right quantities and specifications at the right time from the right source at
the right place. Purchasing, storage, inventory control, standardization, variety
reduction, value analysis and inspection are the other activities associated with
material.
2. Method: choosing the best method of processing form several alternatives. It also
includes determining the best sequence of operations (process plan) and planning for
tooling, jigs and fixtures etc.

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3. Machines and equipment: manufacturing methods are related to production
facilities available in production systems. It involves facilities planning, capacity
planning, allocations, and utilization of plant and equipment, machines etc.
4. Manpower: planning for manpower (labour and managerial levels) having
appropriate skills and expertise.
5. Routing; determining the flow of work material handling in the plant, and sequence
of operations or processing steps. This is related to consideration of appropriate shop
layout plant layout, temporary storage location for raw materials, component and
semi-finished goods, and of materials handling system.

Route Sheet: a route sheet is a document providing information and instructions for
converting the raw material in finished part or product. It defines each step of the
production operations and lay down the precise path or route through which the
product will flow during the conversion process. Route sheet contains following
information:

a) The operation required at their desired sequence

b) Machines or equipment to be used for each operations
c) Estimated set-up time and operation time per piece
d) Tools, jigs, and fixtures required for operations
e) Detailed drawings of the part, sub-assemblies and final assemblies
f) Specification, dimensions, tolerances, surface finishes and quality standard to be
achieved
g) Specification of raw material to be used
h) Speed, feed etc. to be used in machines tools for operations to be carried on.
i) Inspection procedure and metrology tools required for inspection
j) Packing and handling instructions during movement of parts and subassemblies
through the operation stages.
6. Estimating: Establishing operation times leading to fixations of performance
standards both for worker and machines. Estimating involves deciding the quantity
of the product which needs to be produced and cost involved in it on the basis of
sale forecast.
Estimating manpower, machine capacity and material required meeting the
planned production targets are like the key activities before budgeting for resources.
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 7. Loading: machine loading is the process of converting operation schedule into
practices in conjunctions with routing. Machine loading is the process assigning
specific jobs to machines, men, or work centers based on relative priorities and
capacity utilization. Loading ensures maximum possible utilization of productive
facilities and avoid bottleneck in production. It‘s important to either overloading or
under loading the facilities, work centers or machines to ensure maximum utilization
of resources.
8. Scheduling: scheduling ensure that parts and sub-assemblies and finished goods are
completed as per required delivery dates. It provides a timetable for manufacturing
activities.

Purpose of scheduling:

a) To prevent unbalance use of time among work and centers and department.
b) To utilize labour such a way that output is produced within established lead
time or cycle time so as to deliver the products on time and complete
production in minimum total cost.

9. Dispatching: This is concerned with the execution of the planning functions. It

gives necessary authority to start a particular work which has already planned under
routing and scheduling functions. Dispatching is release of orders and instructions
for starting of production in accordance with routing sheet and scheduling charts.
10. Inspection: This function is related to maintenance of quality in production and of
evaluating the efficiency of the processes, methods and labours so that improvement
can be made to achieve the quality standard set by product design.
11. Evaluating: The objective of evaluating is to improve performance. Performance of
machines, processes and labour is evaluated to improve the same.
12. Cost control: Manufacturing cost is controlled by wastage reduction, value analysis,
inventory control and efficient utilization of all resources.

Requirements for an effective Production Planning and Control

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In an organization, PPC system can be effective only if the following aspects are given
due considerations before implementation:

a) Appropriate organization structure with sufficient delegation of authority and

responsibility at various levels of manpower.
b) Right person should be deputed at right place for right job.
c) Maximum level of standardization of inventory, tooling, manpower, job, workmanship,
equipment, etc.
d) Appropriate management decision for production schedule, materials controls,
inventory and manpower turnover and product mix.
e) Flexible production system to adjust any changes in demand, any problem in
production or availability of materials maintenance requirements, etc
f) Estimation of accurate leads times for both manufacturing and purchase.
g) Management information system should be reliable, efficient and supporting.
h) Capacity to produce should be sufficient to meet the demand.
i) The facility should be responsive enough to produce new products change of products
mix and be able to change the production rates.

The above elements are very important and necessary to make the production planning
system effective and efficient.

Utility of PPC Productions

The implementation of PPC based production system yields various advantages to any
organization for various functional activities, which include the following:

a) Last hour rush is avoided: Production is well planned and controlled as per the
given time schedules. Therefore, production control reduces the number of
emergency order and overtime works on plant and thus reduces the overheads.
b) Problems areas of bottleneck get reduced: The incomplete work or work-in-transit
does not get piled up because production control balances the line and flow of work.
c) Cost reduction: An appropriate production control increases the men-machines
utilization, which maintains in process inventories at a satisfactory level, leads to a
better control on raw material inventories, reduces costs of storage and materials

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 handling, helps in maintaining quality and limits rejections and thus ultimately
reduces the unit cost of production.
d) Optimum utilization of resources: It reduces the time loss of the workers waiting
for materials and makes most effectives use of equipment.
e) Better coordination of plants activities: PPC coordinates the activities of the plant
that leads to control concerted effort by workforce.
f) Benefits to workers: PPC results into better efficiency and productivity, which leads
to adequate wages stable employment, job security, improved working conditions
increased job satisfaction and ultimately high morale.
g) Improved services to customers: PPC leads to better services to the customers as it
ensures production in accordance with the time schedules and therefore, deliveries are
made as per the committed schedules.

Scope of Production Planning and Control

a) Nature of Inputs

To manufacture a product, different types of inputs are used. The quality of the product
depends upon the nature of the inputs are used. Hence the planning is done to
determine the nature of various types of inputs which is a complicated process.

b) Quantity of Inputs

To achieve a level of production, determination of quantity of the inputs and their

composition is very important. A product can be prepared only when there is an
estimate of the required composition of inputs.

c) Proper Coordination

It ensures the proper coordination among the workforce, machines and equipment. This
leads to avoidance of wastages and smooth flow of production.

d) Better Control

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 Production planning is the method of control. For a better control, planning is a
precondition. Only then, one can compare the performance and calculate the deviations
which lead control of the production.

e) Ensure Uninterrupted Production

The planning of materials ensures the regular supply of raw materials and other
components. The regular flow of materials and supplies are helpful in the uninterrupted
production.

f) Capacity Utilization

There is a need to use the available resources effectively. It is helpful in bringing down
various costs of production.

g) Timely Delivered

If there is good production planning and control, there will be timely production and
the finished product will be rushed to the market in time. This also ensures the better
relationship with the customers.

Factors affecting Production Planning and control

a) Use of Computers: Modern factories are using office automation equipment like PC,
punch cards etc. It helps accurate computation of required of men and machine.
b) Seasonal Variations: Demand of certain products is affected by seasons, for instance
umbrellas and raincoats during the monsoons and outputs. Production planning and
control must take such changes into consideration while planning and control
activities of inputs and outputs.
c) Test Marketing: In an aggressive marketing strategy new products are to be test
marketed in order to know the trends. This is a short- cycle operation, intermittent in
nature and often upsets regular production.
d) After Sales Service: This has become an important parameter for success. In after
sales services, many items are returned for repair. These are unscheduled Work and
also overload the production line.

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 e) Losses due to Unpredictable Factors: Losses occur due to accidents, fire and theft of
production inputs, mainly materials and Components. These are unpredictable.
Shortage of input due to such factors upset the planned production schedule in time
and quantity.
f) Losses due to Predictable Factors: There are losses of inputs, due to natural
engineering phenomena like production losses and changes in consumption of
materials and occurrence of defectives.

Summary

Production function in a manufacturing organization is concerned with the transformation

of some inputs into some outputs that have some value for the end users. There are many
types of production systems namely mass, process, batch and job production systems. The
selection of system depends upon mainly two things: i) nature of the product, ii) type of
manufacturing process.

Production planning and control can be viewed as nervous system of the production
operation. This function aims at efficient utilization of material resources, people and
facilities in any undertaking through planning, coordinating and controlling the production
activities that transform the raw material into finished products or components as a most
optimal manner. All the activities in manufacturing or production cycle must be planned,
coordinated, organized and controlling to its objectives. Production planning and control as
a department plays a vital role in manufacturing organizations. It is clear from name that it
is something about planning. Planning is defined as setting goals. Production planning and
control provides different kinds of information to different departments. It provides
information about available manufacturing resources to marketing department. Marketing
department receives orders according to that information. Similarly, it coordinates with
other departments and provides relevant information.

Production planning being a managerial function is mainly concerned with the following
important issues:

a) What production facilities are required?

b) How these production facilities should be laid down in the space available for
production?
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c) How they should be used to produce the desired products at the desired rate of
production?

Broadly speaking, production planning is concerned with two main aspects: (i) routing or
planning work tasks (ii) layout or spatial relationship between the resources. Production
planning is dynamic in nature and always remains in fluid state as plans may have to be
changed according to the changes in circumstances.

Production control is a mechanism to monitor the execution of the plans. It has several
important functions:

a) Making sure that production operations are started at planned places and planned
times.
b) Observing progress of the operations and recording it properly.
c) Analyzing the recorded data with the plans and measuring the deviations.
d) Taking immediate corrective actions to minimize the negative impact of deviations
from the plans.
e) Feeding back the recorded information to the planning section in order to improve
future plans.

Self assessment Question

a) Discuss the different types of production systems.
b) Explain the parameters that must be considered before finalizing the production
system.
c) ―Effective PPC guarantees better utilization of resources‖. Comment on the
statement with justification.
d) What do you mean by production planning? Discuss its elements.
e) Explain the utility of PPC based production.

2. 0 Key Words

a) Scheduling: is the timetable for manufacturing activities.

b) Estimating: is a process of setting operation times after fixing standards both for
worker and machines
c) Loading: is the process of converting operation schedule into practices
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 d) Routing: is the process of determining the flow of work material handling in the
plant, and sequence of operations

2.1 References
a) Rama Murthy, P., Production and Operations Management, New Age International
Publishers, 2005
b) Chase, R.B., Aquilano, N.J., and Jacobs, F.R., Production and Operations Management:
Manufacturing and Services, Richard D. Irwin, Inc., 1998.
c) Narshimha, S.L., Production Planning and Inventory Control, PHI, 2002
d) Garg, A.K., Production and Operations Management, Mc GrawHill, 2012
e) Chary, S.N., Operations Management, TMH, 1996
f) Baffa and Sarin, R., Modern Production/ Operations Management, John wiley and
Sons,2002

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