Unit 3: Material and Inventory Management
What is Production Planning and Control (PPC)?
Production Planning and Control (PPC) is the process of planning, managing,
and controlling the production process in a factory or organization to ensure
efficient use of resources, timely delivery, and cost-effectiveness.
Types of Production Planning
Process of Production Planning and Control (PPC)
PPC has several steps to ensure smooth and cost-effective production. The
three major components include Routing, Scheduling, and Loading:
1. Routing
Routing is the process of determining the path (or route) through which raw
materials move to become a finished product.
Key Points:
- Identifies the sequence of operations.
- Determines the machines, departments, or workstations to be used.
Example: In making a table:
- Cut wood (Machine 1)
- Polish wood (Machine 2)
- Assemble parts (Assembly Line)
- Paint (Painting Unit)
2. Scheduling
Scheduling is the process of deciding when each operation is to be
performed.
Key Points
- Fixes start and end time for each operation.
- Helps in timely completion and resource utilization.
Types of Scheduling:
3. Loading
Loading is the process of assigning work to machines or workers based on
capacity.
Key Points
- Balances workload.
- Prevents overloading or under-utilization.
Example: If Machine A can handle 10 units/hour and you need to
produce 50 units, the machine will be loaded for 5 hours. If more is
assigned, it may cause delays.
Conclusion
- Production planning and control (PPC) is essential for:
- Efficient resource utilization
- Timely delivery
- Cost control
- Smoother operations
Understanding Routing, Scheduling, and Loading helps in optimizing the
production process.
Master Production Schedule (MPS)
A Master Production Schedule (MPS) is a detailed plan that states what
product, how many units, and when it will be produced over a specific time
period. It breaks down the aggregate plan into specific products and
quantities.
📌 Key Features:
- It focuses on finished goods.
- Provides detailed information about production dates, quantities, and customer demand.
- Helps coordinate materials, labor, and machines.
- This schedule helps production managers to plan for materials, inventory, and labor needs.
🎯 Importance:
- Improves customer satisfaction by meeting demand on time.
- Helps in resource allocation.
- Guides Material Requirements Planning (MRP).
Aggregate Production Planning (APP)
Aggregate Production Planning is a medium-term plan (typically 3 to 18
months) that helps determine the overall production levels, inventory,
workforce, and resources required to meet forecasted demand. It focuses on
product groups or families (not individual products).
📌 Key Features:
- Matches supply with demand.
- Decides how much to produce, hire, lay off, or subcontract.
- Considers production rate, inventory levels, and labor force.
Importance:
- Balances costs, workforce, and capacity.
- Reduces overproduction or underproduction.
- Provides a framework for MPS.
Difference Between MPS and APP
Types of Inventories
Inventory Control Techniques
1. EOQ (Economic Order Quantity)
EOQ is the optimal order quantity that minimizes total inventory cost
(ordering + holding). EOQ is the ideal order quantity that minimizes
the total inventory cost — which includes ordering cost and holding cost.
Purpose
- Reduce total inventory cost
- Determine the best quantity to order each time
📌 Formula:
Where:
- A = Annual demand (units)
- D = Ordering cost per order
- H = Holding cost per unit per year
Example:
- Annual Demand (A) = 4000 units
- Ordering Cost (D) = ₹100
- Holding Cost (H) = ₹10/unit/year
2. ABC Analysis
Classifies inventory based on value of usage.
Purpose:
- Focus more attention on high-value items (A)
- Simplify management of low-value items (C)
3. VED Analysis
Used mainly in healthcare and engineering to classify items based on criticality.
Purpose:
- Ensure availability of life-saving or mission-critical items
4. FSN Analysis
Based on usage rate.
Purpose:
- Helps in identifying slow or obsolete items for disposal
5. HML Analysis
Based on unit price of items.
Purpose:
- Manage budgeting and purchasing decisions better
6. SDE Analysis
Based on availability.
Purpose:
- Helps in procurement planning and supplier management
Just-in-Time (JIT)
JIT is an inventory management and production strategy where materials
and products are produced only when needed, in the exact quantity
needed, and just in time for use.
📌 Key Features:
- No or minimal inventory is kept.
- Raw materials arrive only when production is scheduled.
- Products are manufactured only when there is a demand.
🎯 Objectives:
- Eliminate waste (time, material, space)
- Reduce storage cost
- Improve production efficiency
- Enhance product quality
🧠 Example: A car company receives tires from the supplier only
when a new car is scheduled for assembly, rather than storing tires in
advance.
Advantages of JIT
- Low inventory holding cost
- Less warehouse space required
- Reduces waste and obsolete stock
Disadvantages
- High risk if suppliers delay
- Not suitable for unpredictable demand
- Requires strong coordination with suppliers
KANBAN
KANBAN is a visual tool (usually a card or signal system) used to
control the flow of materials in a production system. It tells when to
produce, what to produce, and how much to produce.
📌 How It Works:
- When a worker finishes a part, they place a KANBAN card as a signal to request the next batch.
- It controls inventory levels by limiting work-in-progress.
🧱 Types of Kanban:
Example: In a bakery:
- When 10 loaves of bread are sold, a Kanban card is placed for the baker to make 10 more loaves.
- No extra bread is made unless it is sold, minimizing waste.
Benefits of Kanban:
- Easy to implement
- Reduces overproduction
- Improves workflow visibility
- Encourages team coordination
🔄 JIT vs. KANBAN
Tags:
OPERATIONS MANAGEMENT