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Production Planning and Control in a Steel Plant

• satyendra
• October 7, 2013
• 2 Comments
• Annual plan, Consumption norms, Daily plan, Long term plan, Made to stock, Maintenance plan, marketing plan, medium term plan, Monthly plan, PPC, Production control, production planning,

Production Planning and Control in a Steel Plant

In a steel plant, the production process consists of a production system consisting of several inter-connecting processes whereby raw materials are converted into finished steel utilizing fuels, utilities, and other materials. In this production system, some by-products are also generated. The production system has got a wide number and variety of processes differing in their nature, technology, and work environment. Some of these processes work in series while the other processes work in parallel. The primary objective of the steel plant management is that the operation of these diverse production processes is carried out in efficient, economical and integrated manner to produce and dispatch steel products in quantities and qualities needed by the customers.

Production function is that part of the organization, which is concerned with the transformation of a range of inputs into the required outputs (products) having the requisite quality level. Production can be understood as ‘the step-by-step conversion of one form of material into another form through metallurgical, chemical, or mechanical process to create or enhance the utility of the product to the user. Hence production is a value addition process and is an organized activity.

Before the start of the actual production process planning is needed (i) the capacities available for the plant and equipment, (ii) anticipating the possible difficulties during production, and (iii) deciding in advance the way the production processes are to be carried out in an efficient and economical way. However, only planning of production is not sufficient. Hence management is required to take all possible steps to see that plans chalked out by the planning department are properly adhered to and the standard sets are attained. In order to achieve it, control over production process is to be exercised.

Production planning and control (PPC) is part of the production system of the organization and responsible for the smooth coordinated production in the organization. It is a tool available to the plant management to achieve the stated objectives of meeting the production targets in an efficient manner. PPC balances the available capacities with the product requirements to meet the market demands. With PPC plans, the production of the plant becomes systematic and becomes focal point for all the departments for the achievement of the departmental targets and objectives. An efficient PPC department is crucial for the successful operation of the plant.

PPC consists of planning of production to establish the route of production and to make schedules which ensures optimum utilization of materials, production facilities and workforce. PPC by close monitoring also ensures that the plant operation is carried out as per the plans and the results are obtained in terms of quantity, quality, delivery schedule and cost of production.

The main objectives are (i) to prepare and monitor the production schedules, (ii) to carry out planning for the procurement of raw materials, fuels, utilities, and other materials, (iii) to plan product dispatch along with the marketing or sales department, (iv) to facilitate in the attainment of maximum utilization of resources, (v) to plan production of products of the needed quality, (vi) to plan with minimum manufacturing cycle time, (vii) to plan maintenance of optimum inventory levels at various production stages, (viii) to integrate maintenance schedules of the shop with production plan, (ix) to plan production with maximum flexibility in operations, (x) to achieve coordination between process, work-force and other connected departments, (xi) to collect various data and analyze it for monitoring and decision making, (xii) to act as a custodian for the data of production system, (xiii) to identify bottlenecks in fulfillment of production plans, and (xiv) to facilitate cost and budget controls and to achieve the goals at minimum cost.

There are several factors which influence and impact PPC. These factors are quantity, quality, customer requirements, inventories, cost, and time etc. These factors along with the volume and variety of the expected output tend to be largely driven by the amount of interest the customer has for the product of the organization. Customer interest in the organizational products in turn is influenced by the price, quality, delivery, and flexibility.  In other words, market drives the products which are required to be produced by the organization. This, in turn, influences the utilization of the processes of the organization. However, some production can be done as ‘made-to-stock’ for future sale. Made-to-stock production has high dependence on the inventories levels which can be sustained by the organization.

Production planning and control is part of the production system of the organization and responsible for the smooth coordinated production in the organization. It consists of (i) an intellectual process, (ii) the conscious determination of the course of action, and (iii) basing of the decisions on purpose, facts, and considered estimates. It can be defined as the ‘direction and coordination of the resources of the organization towards attaining the prefixed organizational objectives’. PPC helps to achieve uninterrupted flow of materials through the production system by making available the materials at right time and required quantity.

As per Ray Wild ‘Production planning is concerned with the determination, acquisition, and arrangement of all facilities necessary for future operations’. Fixing goal of production and estimating resources needed to achieve this objective is called production planning. It forecasts individual step into the production process. It helps to achieve production objectives effectively, promptly, and economically.

According to James Lundy ‘the production control function involves the coordination and integration of the factors of production for optimum efficiency’. Production control is done after production planning. It implements the production plan. It directs, coordinates, and controls the production. It helps to achieve the production objectives. It helps to have maximum production at minimum cost. It also helps to have timely dispatch of the products from the plant. Fig 1 shows the process of production planning and control.

Fig 1 Process of production planning and control

Hence, PPC results in effective utilization of plant capacity, equipment, and resources which in turn results into control of the production cost. PPC ensures a regular and steady flow of production with all the processes and equipment put to their optimum use. This helps in achieving a continuous production of the products and dispatch of the products to the customers.

Production planning and control consists of the process of planning the production in advance, setting the production route for the each of the steel product needed to be produced. The plan starts with the quantities, qualities, and the types of the finished products needed to be produced during the specified period and then working backwards to determine the production route, the inventories needed to be maintained for the intermediate products, and finally deciding the quantities and the qualities of the different raw materials, fuels, utilities, and other materials needed for the production of the planned products. This also helps in deciding the inventories level needed to be maintained in the plant for the different raw materials, fuels, utilities, and other materials.

During the production planning, those parameters which are to be measured for the monitoring of the processes are identified. Monitoring of the identified process parameters facilitates the control of the processes as well as control of the plan fulfilment. In case of deviations in the monitored process parameters timely corrective actions are needed for the fulfillment of the production plan.

Hence, PPC results in effective utilization of the capacity of the plant and equipment, and other resources which in turn results into control of the production cost. PPC ensures a regular and steady flow of production with all the processes and equipment put to their optimum use. This helps in achieving a continuous production and dispatch of the products to the customers.

During the production planning, those parameters which are to be measured for the monitoring of the processes are identified. Monitoring of the identified process parameters facilitates the control of the processes as well as control of the plan fulfilment. In case of deviations in the monitored process parameters timely corrective actions are needed for the fulfilment of the production plan.

Production planning

Production planning is an administrative process which involves data collection and analysis, preparation and approval of the plan for the production of the required quantities and quali6ies of the finished products in the organization. Production planning balances the organizational resources with the marketing requirement of the products while fulfilling the set targets for the production. It is dynamic in nature and always remains in fluid state and is required to be revised with changes taking place in the production environmental conditions. Further, the level of details of the production plan determines how much informative and useful the plan is for the purpose for which it is made. Also, the production plans are required to have high level of accuracy. Over-planning and under-planning have adverse affect of the performance of the organization.

Production planning is a continuous process and consists of deciding the best alternative amongst several available alternatives for the achievement of organizational objectives related to the production. It is regarding making decision in advance the line of actions needed for achieving of the production targets. It is pre-disposition of doing things in a systematic way for the production and comprise of acting based on facts rather than on guesses. The principle of production planning is given in the statement ‘first plan the work, then work on the plan’.

The basis of making a production plan include (i) organizational objectives and targets related to the production, (ii) facilities and the capacities available at the different production stages of the plant, (iii) projected market requirements of the products, (iv) product mix of the products to meet the market requirements, (v) available qualities of the raw materials, fuels, utilities, and other materials, (vi) maintenance of the plant and equipment needed, (vii) availability of funds for supporting of the production, (viii) existence of internal and external bottlenecks, and (ix) complying of the regulatory requirements.

Another important aspect of the production planning is the level of inventories which are to be maintained for the in-process materials (intermediate products. Inventory has a cost involved in it. Hence, inventory is to be low enough so as not to have high cost burden on the final products but at the same time is to be sufficient so as not to affect the production in the downstream units. Equally important is the finished product inventory. Products produced for the purpose of ‘make-to-stock’ not only increase the finished product inventory but also causes deterioration of the product quality during storage. Similar is the case with the inventories of raw materials, fuels, utilities, and other materials.

The production plan takes into the account the planned maintenance activities of the plant and equipment during the specified period. The production plan is made by making use of the approved consumption norms of the raw materials, fuels, utilities, and other materials. The plan needs approval of the management.

Production planning includes planning of materials needed for meeting the planned production targets. In the plans, the requirements of the different raw materials, fuels, utilities, and other materials needed for the production of the planned products are calculated as per the consumption norms. The projected planned quantities of materials guide the procuring departments to take timely action for procurement and thus avoid any disruption in the production because of the lack of the materials. Fig 2 shows production planning process. Fig 2 shows production planning process.

Fig 2 Production planning process

For making a production plan, there are some requirements. These are (i) product marketing plan, (ii) approved consumption norm, and (iii) maintenance plan. Production plan is normally made as annual plan (operational plan), medium term plan also known as tactical plan (e.g. three year or five year plan), or long term plan also known as strategic plan (e.g. ten or fifteen year plan).

The annual plan is normally broken down in monthly plan and daily plan for the purpose of the monitoring of the implementation of the plan. As the plan period is reduced, the plan becomes more detailed to facilitate the monitoring activities. Also, when the implementation of the approved plan starts, there is a requirement to coordinate the activities of various production and other departments of the steel plant. This is necessary to achieve a balanced and uninterrupted production flow in the plant. Production plan contributes to this requirement.

During the preparation of the production plan, participation of all the departments connected with the production activities is ensured and their views are taken into account. This is necessary for ensuring that the plan is practical and reliable during its implementation. This also ensures the plan acceptability by the departments. Once the plan is prepared, then execution of plan is carried out in line with the details given in the plan.

Stages of production planning

The production planning is carried out jointly with involvement of the concerned departments. The agreed inputs from the department are used for preparation of a centralized plan. This centralized plan is finally approved by the management to ensure that it fulfills the organizational objectives. The production planning activity is normally carried out in the following four stages.

The first stage consists of preparation of the long term and medium term plans. These plans are made in sufficient details and are normally made for the formulation of the policies of the organization.

The second stage consists of the preparation of the annual plan. It is the most important stage of the production planning. The annual plan is a very detailed plan and contains besides production details of finished products, intermediate products, and by-products, the planned requirements of the quantities and the qualities of the different raw materials, fuels, utilities, and other materials as well as the qualities and the quantities of the finished products and the by-products which are required to be produced and dispatched. Annual plan is required to be prepared with an inbuilt challenge built into it for improving the working efficiency of the plant. Normally this plan is broken into monthly plan and department plans.

The annual plan also contains the planning of techno-economic parameters. It is the document which is used by different departments for their internal planning. It is also used for the preparation of annual budget of the organization as well as for resource allocation. The annual plan is the basic document which is utilized for renewal of annual contracts or for planning new contracts in different departments. In fact, this annual plan is the basic document for further planning activity in all other areas. A lot of input goes in preparation of this plan. The accuracy of this plan determines to a large extent the efficient working of the plant during the year.

The next and third stage of production planning is the monthly plan. The quantity of production is same as given for the month in the annual plan but it is detailed out with respect to the quality of products to be produced and dispatched. It also contains fairly accurate level of raw material requirement based on the inventory level. Sometimes the production quantity is adjusted from the annual plan if any changes take place in the environment.

The fourth and final stage is daily plan. This plan is detailed with respect to grade wise production and dispatches of the products. It includes scheduling of the production and dispatches.

Sometimes it becomes necessary to carry out re-planning because of some happening in either external or internal environment for example change in market condition, an accident etc. During the re-planning targets normally undergo changes.

Production control

Production control is the process of verifying whether actual production is taking place as per the production plan. Whereas production planning sets the course, production control observes the deviations from the course and initiates action to return to the chosen course or to a changed approved course.

The production control activities are important for ensuring that the production processes are taking place as per plans. Control activities help in taking corrective actions if some deviations are observed from the plans. While production planning is a forward thinking activity, production control involves looking backwards and to take actions so as to meet the requirements needed for the fulfillment of the plan.

In case there is a deviation between actual production and planned production, the control function comes into action. Production control through control mechanism tries to take corrective action for the fulfilment the planned production targets. Hence, production control reviews the progress of the plan fulfilment and takes corrective steps in order to ensure that the production takes place as planned. For production control mechanisms to be effective, it is essential that free and smooth flow of information takes place in the organization.

In spite of planning to the minute details, some deviations from the plan do take place during the implementation of the production plan. Some of the reasons for these deviations from the plan are (i) non-availability of the raw materials, fuels, utilities, and other materials, (ii) breakdown of the plant and equipment, (iii) a change taking place in the products mix for meeting the market requirements, (iv) human related and industrial relations related issues, (v) disturbance in production taking place due to some accident or some hazard, and (vi) external issues. Because of changes taking place in the production environment, the production deviates from the planned path and hence control function comes into action.

Production control through control mechanism tries to correct the deviation from the planned path by making changes in the plan with the aim to keep the overall production at the levels in the original plan. These corrective actions are taken so as to achieve the targets set as per plan by using control techniques. The control techniques normally consist of the monitoring of the each activity of the plan and observing whether any deviation is taking place. Once a deviation is noticed then after analyzing of the deviation, the corrective action which is needed to be taken is decided. Hence, the planning activity of PPC is dynamic in nature.

Production control is a mechanism to monitor the execution of the production plans. It consists of several important functions namely (i) making sure that production operations at the planned places and planned times are as per the plan, (ii) monitoring of the progress of the operations and recording it properly, (iii) analyzing the recorded data with the plans and measuring the deviations, (iv) reporting of the deviations for taking immediate corrective actions to minimize the negative impact of deviations from the plans, and (v) feeding back the recorded information to the planning section for improving future plans.

Further, a very large amount of data is generated in the process system which need to be collected and analyzed so that the data can be presented in a manner so that it become useful for proper monitoring of the processes as well as decision making. In short, very close production control functions are to be carried out for the proper functioning of the production system.

The activities for controlling the production to take place as per plan include (i) exercise of controls related to plan implementation, (ii) involves collection of data with respect to production, stocks, quality, techno-economic parameters, receipts of raw materials, and dispatches of the products etc and can also include some other data which is not directly related to the production but important for the management for control purpose, (iii) involves analysis of the collected data and reporting in different details as needed by various levels of management, and (iv) includes following of the progress, follow up actions, and expediting. Production control is more of a decentralized activity which is to be exercised at shop floor level. However in certain cases either guidance from the management is needed or even centralized control is needed.

Advantages and limitations of PPC

Production planning and control function is the nerve centre of the production system because of the several reasons which include (i) it coordinates all phases of the production / operating system, (ii) it is an efficient system which results into better quality, optimum utilization of resources, lower level of inventories, reduction in production cycle time, faster delivery, more efficient customer service, lower costs of production, and lower capital investment etc., (iii) it leads to more efficient use of resources which results into higher productivity, economy in production, quality of goods or services, and timely delivery etc., (iv) it results into higher sales, more profits, increase in market share, increase in competitive advantage etc., (v) as a result of systematic planning and control which has been integrated with maintenance plans, equipment breakdowns are minimized, maintenance is improved, excess capacity and idle time is minimized and steady flow of products is maintained, and (vi) it contributes considerably in increasing the good-will and image of the organization.

In spite of several benefits of production planning and control, it has certain limitations. It is a time-consuming exercise. It is based upon certain assumptions or forecasts about level of demand, availability of materials, technological progress, regulatory policies etc. If these assumptions go wrong the production planning and control function can turn out to be ineffective. Further, it becomes a difficult exercise especially when external environmental factors changes very rapidly. Also, the employees can resist changes when planning involves several changes.