RVS Institute of Management Studies and Research

Sulur, Coimbatore 641 402

Production and Operations Management
2015 Batch
Unit II Part A
1. What are the Objectives of Production Planning and Control?
Objectives of Production Planning and Control:
1. Systematic planning of production activities to achieve the highest efficiency in
production of goods/services.
2. To organize the production facilities like machines, men, etc., to achieve stated
production objectives with respect to quantity and quality time and cost.
3. Optimum scheduling of resources.
4. Coordinate with other departments relating to production to achieve regular
balanced and uninterrupted production flow.
5. To conform to delivery commitments.
6. Materials planning and control.
7. To be able to make adjustments due to changes in demand and rush orders.

2. What are the phases of Production planning and control? What are the functions of each
Phase?
3. What are the roles of production planning and control?

4. What are the pure strategies of aggregate planning?

a. Vary the size or the workforce: Output is controlled by hiring or laying off
workers in proportion to changes in demand.
b. Vary the hours worked: Maintain the stable workforce, but permit idle time
when there is a slack and permit overtime (OT) when demand is peak.
c. Vary inventory levels: Demand fluctuations can be met by large amount of
inventory.
d. Subcontract: Upward shift in demand from low level. Constant production rates
can be met by using subcontractors to provide extra capacity.
5. Discuss Master production schedule.
a. Master production plan/schedule aims to prepare a product-wise schedule which
is consistent with the aggregate planning
b. A master production schedule (MPS) is a product-wise plan for manufacturing
products.
c. When a firm uses an MRP (Material Requirement Planning) system, the MPS
provides the top-level input requirements.
d. This gives the volumes of production during various periods in the planning
horizon.
6. What are the advantages and requirements of Material Requirement Planning?

Benefits
MRP enables managers to easily determine the quantities of every component for a
given order size, to know when to release orders for each component, and to be
alerted when items need attention. Still other benefits include the following:
1. Low levels of in-process inventories, due to an exact matching of supply to
demand.
2. The ability to keep track of material requirements.
3. The ability to evaluate capacity requirements generated by a given master
schedule.
4. A means of allocating production time.
5. The ability to easily determine inventory usage by back flushing.

Requirements
In order to implement and operate an effective MRP system, it is necessary to have
1. A computer and the necessary software programs to handle computations and
maintain records.
2. Accurate and up-to-date
a. Master schedules.
b. Bills of materials.
c. Inventory records.
3. Integrity of file data.

7. An automatic drive-in teller at American National Bank has the capacity of handling 2,000
entries per regular banking day (according to the firm that sold it to the bank). However,
because of limitations imposed by automobile access, the teller is available only 60 per
cent of the time. It is actually being used for about 800 entries per day. What is the
system efficiency? What is the system utilization? Explain benefits of capacity
requirement planning.
System Efficiency
2,000 entries with 60 per cent of the time = Expected Output = 1200
Actual Output = 800
System Efficiency = 800/1200 = 66.67%
System Utilization
Actual Utilization = 1200
System Capacity = 2000
System Utilization = 60%

Capacity requirements planning is the process of determining short-range capacity

requirements. An important aspect of capacity requirements planning is the
conversion of quantity requirements into labor and machine requirements. One
accomplishes this by multiplying each periods quantity requirements by standard
labor and/or machine requirements per unit.
8. Given the information below, compute the efficiency and the utilization of the vehicle repair
Department: Design capacity = 50 trucks per day Effective capacity = 40 trucks per day
Actual output = 36 trucks per day. From the given the information, you are asked to help
the production manager by way of computing the efficiency and the utilization of the
vehicle.

System Efficiency
Effective capacity = 40 trucks
Actual output = 36 trucks
System Efficiency = 36/40 = 90%
System Utilization
Effective capacity = 40 trucks
Design capacity = 50 trucks
System Utilization = 80%

9. What kind of activities should be considered in the different phases of production planning
and control?

Prior planning Loading

Active planning. Scheduling
Product development and design Dispatching
Forecasting Job order
Aggregate planning Stores issue order
Material requirement planning Tool order
Process planning and routing Time ticket
Material planning Progress reporting
Tools planning Corrective action

10. What kind of inputs used in the Material Requirement Planning?

Cumulative lead time: The sum of the lead times that sequential phases of a
process require, from ordering of parts or raw materials to completion of final
assembly.
Bill of materials (BOM) One of the three primary inputs of MRP; a listing of all
of the raw materials, parts, subassemblies, and assemblies needed to produce one
unit of a product.
Product structure tree: A visual depiction of the requirements in a bill of materials,
where all components are listed by levels.
Inventory records One of the three primary inputs in MRP; includes information
on the status of each item by time period.
Gross requirements Total expected demand for an item or raw material in a time
period.
Scheduled receipts Open orders scheduled to arrive from vendors or elsewhere in
the pipeline.
 Projected on hand Expected amount of inventory that will be on hand at the
beginning of each time period.

Unit II Part B
11. Consider the Example of Beta Corporation. The forecast for a group of items is
reproduced below.

Quarter Demand Cumulative Demand

1 270 270
2 220 490
3 470 960
4 670 1630
5 450 2080
6 270 2350
7 200 2550
8 370 2920
Suppose that the firm estimates that it costs Rs.150 per unit to increase the production
rate, Rs.200 per unit to decrease the production rate, Rs.50 per unit per quarter to carry
the items on inventory and Rs.100 per unit if subcontracted. Compare the cost incurred if
varying the work force size pure strategy is followed.

Varying the Work Force size to meet the Demand

Cost of Total
Deman Cost of
Increasing Cost
Quarte d Cumulativ Decreasing
Productio of
r Forecas e Demand Production
n Level Plan
t Level (Rs.)
(Rs.) (Rs.)
1 270 270 0 0 0
2 220 490 50 10000
3 470 960 250 37500
4 670 1630 200 30000
5 450 2080 220 44000
6 270 2350 180 36000
7 200 2550 70 14000
8 370 2920 170 25500
19700
Total
0

12. Consider the Example of Beta Corporation. The forecast for a group of items is
reproduced below.
 Quarter Demand Cumulative Demand
1 270 270
2 220 490
3 470 960
4 670 1630
5 450 2080
6 270 2350
7 200 2550
8 370 2920
Suppose that the firm estimates that it costs Rs.150 per unit to increase the production
rate, Rs.200 per unit to decrease the production rate, Rs.50 per unit per quarter to carry
the items on inventory and Rs.100 per unit if subcontracted. Compare the cost incurred if
changing inventory levels pure strategy is followed.

Cost Calculation for Changing Inventory Levels

Adjusted
Inventory Cost of
Cumulative Adjusted
Quarte Demand Cumulative Production with at Holding
Production Inventory Inventory
r Forecast Demand Level Beginning Inventories
Level with
of Period (Rs.)
1
1 270 270 365 365 95 255 350 17500
2 220 490 365 730 240 255 495 24750
3 470 960 365 1095 135 255 390 19500
4 670 1630 365 1460 -170 255 85 4250
5 450 2080 365 1825 -255 255 0 0
6 270 2350 365 2190 -160 255 95 4750
7 200 2550 365 2555 5 255 260 13000
8 370 2920 365 2920 0 255 255 12750
Total 96500

13. Consider the Example of Beta Corporation. The forecast for a group of items is
reproduced below.

Quarter Demand Cumulative Demand

1 270 270
 2 220 490
3 470 960
4 670 1630
5 450 2080
6 270 2350
7 200 2550
8 370 2920
Suppose that the firm estimates that it costs Rs.150 per unit to increase the production
rate, Rs.200 per unit to decrease the production rate, Rs.50 per unit per quarter to carry
the items on inventory and Rs.100 per unit if subcontracted. Compare the cost incurred if
subcontracting pure strategy is followed.

Cost Calculation Subcontracting

Deman Incremen
Quarte d Prodection Subcontra tal Cost at
r Foreca Level ct Units Rs.100/Un
st it
1 270 200 70 7000
2 220 200 20 2000
3 470 200 270 27000
4 670 200 470 47000
5 450 200 250 25000
6 270 200 70 7000
7 200 200 0 0
8 370 200 170 17000
Total 132000

14. Consider the Example of Alpha Corporation. The forecast for a group of items is
reproduced below.

Quarter Demand Cumulative Demand

1 370 370
2 320 690
3 570 1260
4 670 1930
5 550 2480
6 370 2850
7 350 3200
8 480 3680
Suppose that the firm estimates that it costs Rs.150 per unit to increase the production
rate, Rs.200 per unit to decrease the production rate, Rs.50 per unit per quarter to carry
 the items on inventory and Rs.100 per unit if subcontracted. Compare the cost incurred if
varying the work force size and subcontracting pure strategies is followed.

Varying the Work Force size to meet the Demand

Cost of Total
Deman Cost of
Decreasing Cost
Quarte d Cumulativ Increasing
Productio of
r Forecas e Demand Production
n Level Plan
t Level (Rs.)
(Rs.) (Rs.)
1 370 370 0 0 0
2 320 690 50 7500
3 570 1260 250 50000
4 670 1930 100 20000
5 550 2480 120 18000
6 370 2850 180 27000
7 350 3200 20 3000
8 480 3680 130 26000
15150
Total
0

Cost Calculation Subcontracting

Incremental
Demand Subcontract
Quarter Production Level Cost at
Forecast Units
Rs.100/Unit
1 370 320 50 5000
2 320 320 0 0
3 570 320 250 25000
4 670 320 350 35000
5 550 320 230 23000
6 370 320 50 5000
7 350 320 30 3000
8 480 320 160 16000
Total 112000

15. Consider the Example of Alpha Corporation. The forecast for a group of items is
reproduced below.

Quarter Demand Cumulative Demand

1 370 370
2 320 690
3 570 1260
 4 670 1930
5 550 2480
6 370 2850
7 350 3200
8 480 3680
Suppose that the firm estimates that it costs Rs.150 per unit to increase the production
rate, Rs.200 per unit to decrease the production rate, Rs.50 per unit per quarter to carry
the items on inventory and Rs.100 per unit if subcontracted. Compare the cost incurred if
changing inventory levels pure strategy is followed.

Cost Calculation for Changing Inventory Levels

Adjusted
Adjuste Inventor
Deman Cumulati Cost of
Cumulati d y with
Quarte d Productio ve Inventor Holding
ve Inventor 180 at
r Foreca n Level Productio y Inventori
Demand y with Beginnin
st n Level es (Rs.)
180 g of
Period 1
1 370 370 460 460 90 180 270 13500
2 320 690 460 920 230 180 410 20500
3 570 1260 460 1380 120 180 300 15000
4 670 1930 460 1840 -90 180 90 4500
5 550 2480 460 2300 -180 180 0 0
6 370 2850 460 2760 -90 180 90 4500
7 350 3200 460 3220 20 180 200 10000
8 480 3680 460 3680 0 180 180 9000
Total 77000

Unit II Part C
Case Study
Material Requirement Planning
Master Production Schedule
Week 1 2 3 4 5 6 7 8
Demand 100 150 140 200 140 300

DETAILS OF BILL OF MATERIALS

Order Lead Time Stock on

Part Required No. of Units
Quantity (week) Hand

Fire extinguisher 300 1 1 150

Cylinder 450 1 2 350
 Valve assemblies 400 1 1 325
Valve 350 1 1 150
Valve housing 450 1 1 350

PRODUCT STRUCTURE
The Bill of Materials Structure is given in the following figure.

Fire
extinguish
er

Valve
assemblie Cylinder
s

Valve
Valve
housing

Calculate MRP for Fire extinguisher, Cylinder, Valve assemblies, Valve and Valve housing.
MRP calculations for Fire extinguisher
LT=1
EOQ=300 WEEK
PERIOD 0 1 2 3 4 5 6 7 8
PROJECT
100 150 140 200 140 300
REQUIREMENT
RECEIPTS 300 300 300
STOCK ON 15
HAND 0 50 50 200 60 160 20 20 20
-100 -140 -280
PLANNED
ORDER
RELEASE 300 300 300

MRP calculations for Cylinder

EOQ= LT=2
450 WEEK
PERIOD 0 1 2 3 4 5 6 7 8
PROJECT 300 300 300
REQUIREMENT
RECEIPTS 450 450
STOCK ON
HAND 350 350 50 50 200 200 200 350
-250 -100
PLANNED
ORDER
RELEASE 450 450

MRP calculations for VALVE ASSEMBLY

EOQ= LT=1
400 WEEK
PERIOD 0 1 2 3 4 5 6 7 8
PROJECT 300 300 300
REQUIREMENT
RECEIPTS 400 400
STOCK ON
HAND 325 325 25 25 125 125 125 225
-275 -175
PLANNED
ORDER
RELEASE 400 400

MRP calculations for VALVE

EO
Q=
35 LT=1
0 WEEK

PERIOD 0 1 2 3 4 5 6 7 8

400 400
PROJECT REQUIREMENT
35 35
RECEIPTS 0 0
15 15 10 10 10
STOCK ON HAND 150 0 0 0 0 0 50 50 50
- -
25 30
0 0
35 35
PLANNED ORDER RELEASE 0 0

MRP calculations for VALVE HOUSING

EO
Q4 LT=1
50 WEEK
PERIOD 0 1 2 3 4 5 6 7 8

400 400
PROJECT REQUIREMENT
45
RECEIPTS 0
 35 35 40 40 40
STOCK ON HAND 350 0 0 0 0 0 0 0 0
-50
45
PLANNED ORDER RELEASE 0