You can buy this here: http://imojo.in/330t3x This presentation is aimed at helping small and medium businesses in their production planning processes. Production Planning is explained in a detailed manner with step-by-step examples for better understanding.

2. Introduction
Not quite sure if this book would be useful for you?
If you belong to any of the category of people mentioned below, then this book
is for you.
• Manufacturing Sector expects the engineers to be Job-
ready. However, the engineering curriculum does not
cover some of the basics required in the manufacturing
sector. This book would help in understanding the
basics, so that a fresh engineer can perform his role
immediately aCer joining the company.
Fresh Engineers
interested in joining
Manufacturing Sector
• This book can serve as an “InducIon Manual” for the
new Supervisors and Engineers in the shop floor. Job
ResponsibiliIes, Do’s and Don’ts for each role, Tools
and Techniques and MIS reports are explained for each
department. This would help in faster career growth.
Supervisors / Engineers
in the Shop floor
• This book can serve as a Quick Guide to teach you and
your employees, the basics of manufacturing
organizaIon. This would also help you in managing your
people, building the organizaIon to the next level by
creaIng strong processes.
Second GeneraIon
Entrepreneurs

3. Why this book?
• In India, several studies conducted on the employability skills state that
only 5% to 10% of the Engineers graduating from the Institutions are Job-Ready
/ Employable.
• Industries require workforce which are readily employable, so that they
do not have to spend a lot of money and effort on providing basic skills and on-
the-Job training
• While large organisations have Induction training for their employees,
many medium and small scale companies do not have proper structure to
provide this training
• Their employees work with very little awareness of the best practices of
the industry, making them frustrated, fire-fighting for day-to-day activities and
results in a lot of stress
• This also makes the companies uncompetitive, leading to poor business
performance, resulting in poor motivation of the people, and this becomes a
vicious cycle
• This publication is aimed at providing the fundamentals of manufacturing
management which are not offered by any of our institutions/curriculum to
Engineers and Diploma Holders who are joining Manufacturing Industry
• This is our initiative to empower the professionals in performing more
efficiently and effectively helping the organization and the nation
• In addition, this gives us immense satisfaction that we are giving
something back to the ecosystem we are working in and are able to challenge
the traditional way of thinking and practices.

4. What do we cover in the book?
A typical manufacturing company has Production, Production Planning,
Quality, Stores, Purchase, Maintenance, Finance & Accounts, Marketing,
Human Resources, Admin , Information Technology and Sales functions.
However, we would cover
1. Production
2. Production Planning
3. Purchase
4. Stores
5. Quality
6. Maintenance
functions in this book, since these are the major areas, an Engineer or a
Diploma/Degree Holder joins after his/her degree.

5. Structure of the contents
Each department / function is explained in the following structure:
• General Introduction to the Function / Department
• Organization Structure of the function
• Roles and Responsibilities of the key incharges
• Process Flow in the function
• Tools and Techniques required in the function
• Pictures and tables to demonstrate the activities (wherever applicable)
• MIS Reports and the Analysis to be done
• Key Result Areas (KRAs) and Key Performance Indicators (KPIs) for
each function

6. Chapter 1
Introduction

7. Introduction to Manufacturing
Company
A manufacturing company produces goods (or materials) using tools, machines,
chemical processing, biologic processing or formulation and with the use of
people. Manufacturing ranges from small hand-made products (Handicrafts
industry) to large / Hitech products (Aircraft / Bullet Trains).
A typical manufacturing company procures many parts/raw materials from
various suppliers (or Vendors), process them (discrete manufacturing or flow
manufacturing) and sell to its customers. These customers may be the end users
of the product or may use the products to make other products. For e.g. A glass
manufacturing company procures silica and other raw materials for making
glass. This can either be sold as end product to consumers (for home use) or to
an Automotive factory to use these glass for cars (of course, the grades would
be different).
In this book, we consider a typical manufacturing company consisting of a few
discrete manufacturing processes (e.g., Turning, Milling, Polishing, etc.).

8. There are various functions (or departments) in organisations, each focusing on
a few major activities.
1. Production Function - Focuses on the manufacturing of the product
2. Purchase Function - Focuses on purchasing / buying the raw materials
and consumables required for the production
3. Stores Function - Focuses on the receiving the incoming raw materials,
holding them properly and issuing them to the user department when there is a
need for the materials
4. Maintenance - To keep all the machines ready for production. To prevent
break-downs of machines,
Each function consists of a group of persons (or a single person) performing
their tasks.
A company is headed by the CEO / Directors / Owners depending on its
structure. Various levels of managers across various functions report to the CEO
/ Directors. Supervisors / In-charges report to the managers and they manage the
operators (shop floor employees across various levels)
Pic: 1.1 - Various Levels of Employees
CEO / VP / Promoter
Process steps that take time,
(VA)
A process step that transforms or
shapes a product or service, which is
eventually sold to a customer.
resources, or space, but do not add
value to the product or service.
Directors / Promoters
Managers (various levels)
Supervisors / Incharges
(various levels)
Operators / Employees
(various levels)
Senior Management Level
Middle Management Level
Junior Management Level
Employee Level

9. Internal and External
Customer
External Customer: A customer who buys the product / services of a
company. All the functions in an organization exist to fulfil the need of these
end customers. This customer is not a part of your organization but pays your
organization for the products / services.
Internal Customer: A member of the organization providing goods / services
for other members inside the organization. For e.g. Stores issues raw materials
to production. So Production function is a customer for Stores. Inside
Production function, each operation sends the product to the next operation thus
becomes a supplier to the next operation. These are called Internal Customers
and Internal Suppliers.
Pic: 1.2 - Internal Suppliers and Customers
Stores Production
Internal CustomerInternal Supplier

10. Goals of each department
Each department works with a set of goals which are aimed at satisfying /
exceeding their Internal / External customer’s needs. These goals are called Key
Result Areas (KRA’s) or Department Objectives / Targets.
Generally there are 6 major categories of objectives / KRAs:
1. Productivity
2. Quality
3. Cost
4. Delivery
5. Safety
6. Morale
These KRA’s needed to be measured through various Indicators. They are
called Key Performance Indicators (KPIs). For e.g. Productivity can be
measured by indicators like “output per person per day”, “Planned production
vs. achieved production”, “Utilisation of the machine”, etc. Similarly, Quality
can be measured by “Reduction in defectives”, “% of yield”, etc.
All the departments will have KRAs and KPIs to measure their performance.
Generally there would be a Monthly Review Meeting (MRM) to discuss the
performance and take corrective and preventive actions.

11. Chapter 2
Production
Planning

12. Production Planning Function
Production Planning is one of the critical functions, which plans for the
production of the goods in the company.
In a nutshell, Production Planning takes into account, the demand from the
customer, the raw materials availability, Machine and employee availability and
other infrastructural requirements and suggests a plan for the production.
This section aims at providing the basic knowledge of Production Planning
Function, some of the tools and techniques used in the process and help the
reader to plan for the production.

13. Production Planning Function
• Production Planning function is responsible for preparing the Plan for the
production
• Normally the planning is done through Manufacturing Requirements
Planning (MRP) or Manufacturing Resource Planning (MRP2)
• Enterprise Resource Planning (ERP) is the automated & integrated
version of MRP2 – Nowadays a lot of ERP packages are in use widely, across
industries
• For our easy understanding, the focus would remain on the MRP systems

14. Materials Requirement
Planning (MRP)
• Material requirements planning (MRP) is a production planning and
inventory control system used to manage manufacturing processes.
• Evolved in1960’s
• An MRP system is intended to simultaneously meet three objectives:
• Ensure materials are available for production and products are available
for delivery to customers
• Maintain the lowest possible material and product levels in store
• Plan manufacturing activities, delivery schedules and purchasing
activities
MRP2
• MRP2 had evolved from MRP in the 80’s
• It encompasses the same methodology but includes integrated materials
planning, finance and human relations.
• It has a simulation capability to answer "what-if" questions
• There are many software available for planning using MRP2

15. Enterprise Resource Planning
(ERP)
• Integrated functions aids in better planning and execution
• Both MRP and MRPII are still widely used, independently and as
modules of more comprehensive ERP systems
• Automatically calculates the materials purchasing, production planning
and delivery schedules

16. Pic: 6.1 - Evolution of Production Planning Tools
Terminology Used in Planning
• The following are the various factors that should be considered while
planning for the production
Pic: 6.2 - Terminology used in Production Planning
Suppliers Company Customers
1. Stock in hand
2. Pending Order
Status
3. Lead Time /
Safety Stock
4. Minimum
Order Quantity
1. Bill of
Materials
2. Machine /
Labor
Productivity
1. Customer
Order
2. Forecasted
Demand

17. Suppliers - Stock in hand
• This is the stock for the items present in hand
• Finished goods
• Raw materials
• For e.g. For a customer order of 500 items of ‘X’ product, if we have 100
nos of ‘X’ in stores, we can plan only for the remaining 400 nos
Suppliers - Pending Order
Status
• This refers to the pending Purchase Orders that are yet to be fulfilled by
the suppliers/ vendors
• One has to take this also in to account while planning for the materials

18. Suppliers - Lead Time and
Safety Stock
• This has been clearly explained in the Purchase and Stores modules
• Lead time – is the time an item takes to reach the factory gate from the
time of raising a PO
• Safety Stock – is the stock quantity/no of days of stock that should be
planned to compensate for any uncertainty in the delivery
Suppliers - Minimum Order
Quantity
• There is a minimum order size and batch size for most of the items. For
E.g. the supplier of welding rods might accept the order only a minimum of 500
rods are ordered and the multiples will be in 100
• Minimum order is 500 nos
• After that multiples of 100 ( an order of 575 nos will not be accepted;
either 600 nos or 500 nos will be accepted by the supplier)

19. Company - Bill of Materials
(BOM)
• Bill of Materials (BoM) is the list of all items required to manufacture a
product
• It includes all raw materials, consumables, packing materials with clear
consumption details to manufacture 1 product
• This must be created for each and every finished product the company is
delivering to the customers
• An example for a BoM is demonstrated here
Pic: 6.3 - Bill of Materials

20. Company - Machine / Labor
Productivity
• What is the time taken for manufacturing – manufacturing lead time
• Lead time of all manufacturing processes
• Machine run time + idle time + transportation + documentation etc. (refer
7 wastes – explained in the production module)
Customers - Sales Order
• A confirmed order from the Customer specifying the following:
• Order No
• Product Required
• Quantity
• Delivery schedule
• Price
• Sample approval / Design / Technical drawings – depending on the
industry

21. Customers - Demand Forecast
• For items which are manufactured based on the sales forecast, the
following items are required for planning:
• Product Required
• Quantity
• Region-wise / other break-up ( depending on the company)
• Shipment date

22. Step-by-Step Example for
Production Planning
• Imagine the company produces a product called ‘X’
• It is made using the following materials:
• Note that items like ‘OK’ sticker, carton boxes etc. are not included the
list. Normally, the small items are omitted from the list, which creates a lot of
confusion while planning the materials. This is why we would create a
detailed/mistake proof BoM
Pic: 6.4 - Sample Bill of Materials for ‘X’ - Note that few Items missing in
this BOM

23. Customer Order
• Let us assume that the customer has placed an order with the following
details:
Order No C10075
Product
Required
X
Quantity 1000 nos ; 2 batches (500 each)
Delivery
Schedule
500 nos on 1st April 2016 and next 500 nos on 17th
April 2016
Price Rs. 5000 per unit
Sample Approved

24. Bill of Materials Generation
• A detailed Bill of Materials would be created and used subsequently for
the product ‘X’
• Please refer to the table below for the BoM
• All the items required for manufacturing 1 unit of “X” is noted.
• Even Packing boxes, consumables and other low value items should be
included
Pic: 6.5 - Detailed Bill of Materials for ‘X’

25. Machine / Labor Productivity
• Let us assume the production consists of 3 activities:
Welding 30 min
Assembling 20 min
Inspection and Sticker Pasting 5 min
Pasting 5 min
Total manufacturing time = 60 mins = 1 hour 1 Hour
There are 5 assembly lines 5 nos
So total production per shift = 8x1x5 40 nos
Assume that the factory works for 2 shifts per day
= 16 hours: Total Production per day
80 nos
Pic: 6.6 - Machine / Labour Productivity

26. Lead Time, Safety Stock and
MOQ
• Let us assume the production consists of 3 activities:
BoM
Per day
Consumption
Lead
time
(days)
Safety
stock
(days)
Safety
Stock
(Qty)
MOQ Multiples
Copper
Rod
5 400 7 3 240 200 50
Steel
Rod
10 800 5 2 160 200 50
Plastic
case -
Type A
2 160 3 2 160 200 50
Plastic
case -
Type B
1 80 3 2 160 200 50
Welding
Rod
2 160 3 2 160 200 50
OK
Sticker
1 80 3 2 160 200 50
Barcode
Lable
1 80 3 2 160 200 50
Packing
Box
1 80 2 1 80 200 50
Carton
box
0.17 13.33 2 1 80 50 10
Pic: 6.7 - Lead time and Safety Stock for the materials

27. Pending Order Status
Order Quantity 500
For I
despatch
Finished Goods
in Stores
100
Net
Requirement
400
Net
Requirement x
BoM qty
Stock in
Hand
Pending
Order Qty
Quantity to
be ordered
Copper Rod 2000 200 100 1700
Steel Rod 4000 300 200 3500
Plastic case -
Type A
800 50 100 650
Plastic case -
Type B
400 60 100 240
Welding Rod 800 200 400 200
OK Sticker 400 50 150 200
Barcode Lable 400 25 200 175
Packing Box 400 200 50 150
Carton box 66.67 20 25 22

28. Pic: 6.8 - Pending Order Status
Production Plan
• Let us assume today's date is 10th March. We have 21 days for delivery.
We can use one assembly line and meet the target. We can start the production
on 15th March.
Pic: 6.9 - Table showing the Production Plan

29. Daily Stock Consumption
Pattern
• Red cells indicate that the stock in stores will get over by that date and
should be refilled before that date, to avoid stock-out situation
Pic: 6.10 - Consumption Pattern of Materials

30. Purchase Plan
• To avoid the stock-situation (refer previous slide), we need to order the
materials as mentioned below:
• The list below gives the date for ordering the raw materials (based on the
lead time and Safety stock).
• Quantity is approximately (or more) than half of the net requirement
quantity for ease of understanding.
• In reality, Re-order status has to be considered while ordering
Pic: 6.11 - Purchase Plan for the materials

31. Conclusion
• The example mentioned in this section has clearly explained the
production planning process, taking into account the following:
• Delivery – based on the customer order
• Manufacturing – based on the manufacturing lead times
• Purchase – Based on the stock position, Re-order level & lead time of the
materials

32. What are the KRAs and KPIs
of your department?
Goals /
KRAs
Performance Indicators /
KPIs
Measure
Current
Level
Target
Productivity
Achieving Planned Production
by the Production Dept
in % 80% 100%
Productivity
Achieving the planned export
orders by the production
in % 50% 100%
Prepare your department’s KRA’s in case your organization does not have
them.

33. Learning’s from the Section
At the end of Production Planning Section, Are you clear on the following?
• Key Terminologies used in the Planning process
• Can you prepare a detailed production plan for a product at your
organization?

34. Interested in buying the book? Please click on any of the following links to buy.
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35. Meet the Author
Ananth is the CEO and Founder of Hash Management Services LLP. Ananth
has over 12 years of experience in the areas of Implementation of Lean
Manufacturing concepts, Quality Management, and Supply Chain Management
initiatives. Some of the industries he works/worked with are Textiles, Leather
and Footwear, Castings and Forgings, Electronic Equipment, Pump
Manufacturing, Fabrication, White goods, Heavy Engineering and Light
Engineering sectors. He works with Industry bodies like CII, FICCI and
currently working with International Labour Organization (ILO) for
implementing their SCORE Program in a few auto ancillaries in Chennai. He is
also an empaneled Lean Manufacturing Consultant (LMC) with National
Productivity Council (NPC) and working on Implementing Lean Manufacturing
principles for Small and Medium Enterprises.
Prior to Hash Management Services LLP, he was a consultant with Deloitte`s
consulting practice in India. Earlier, Ananth worked with Titan Industries Ltd,
as a Senior Engineer responsible for productivity improvements and various
quality initiatives. He holds PGDM from the IFMR, Chennai and a Bachelors
degree in Mechanical Engineering from the Government College of
Engineering, Tirunelveli.
Please visit www.hashllp.com to know more about the ways we help
manufacturing companies improve their operations and profitability.

36. Disclaimer
The advice contained in this material is for a specific audience and not for
general public. The author designed the information to present his opinion about
the subject matter. The reader must carefully investigate all aspects of any
business decision before committing him or herself. The author obtained the
information contained herein from sources he believes to be reliable and from
his own personal experience, but he neither implies nor intends any guarantee of
accuracy. The author particularly disclaims any liability, loss or risk taken by
individuals who directly or indirectly act on the information herein. The author
believes the advice presented here is sound, but the readers cannot hold him
responsible for either the take or the result of those actions.

37. Acknowledgements
This book would not have been a reality without the contribution from V N
Shiju who worked with me on creating the contents, L S Kannan contributed
Quality section, Veerabaghu, my mentor and guide, my wife Jeyalakshmi who
helped me in documentation, A S Senthil Kumar, my first boss who helped me
understand the basics of manufacturing industry, my colleagues at Deloitte and
all my friends who stood by me during some of the toughest times in my life.