Production Planning and Control: formula sheet

Key formulas

Order of production control functions

Routing → Loading → Scheduling → Dispatching → Follow-up

Textbooks differ slightly on where loading sits. State your order and give a one-line meaning for each function.

Core question each function answers

Routing = where and how; Scheduling = when; Dispatching = release and start; Follow-up = is it on plan

Use this to write the difference between routing and scheduling in one line.

Typical routing documents

Route sheet, material requisition, tool requisition, job card, move order

List these when asked what routing and dispatching produce.

Loading types

Finite loading respects capacity; infinite loading ignores capacity

Finite loading gives a feasible plan. Infinite loading shows where overloads will occur.

Work centre load percentage

Load % = Hours of work assigned ÷ Hours of capacity available × 100

A simple check for overload. Above 100% means the work centre is overloaded.

Level production per period

Level output = Total demand over the horizon ÷ Number of periods

Adjust if opening stock or required closing stock is given: (Total demand + closing stock − opening stock) ÷ periods.

Ending inventory

Ending inventory = Opening inventory + Production − Demand

Calculate period by period. A negative figure means shortage or backorder.

Chase strategy production

Production in period = Demand in period (adjusted for stock targets)

Cost is mainly the cost of changing capacity: hiring, layoff, overtime.

Total aggregate plan cost

Total cost = Regular labour + Overtime + Hiring + Layoff + Holding + Shortage + Subcontracting

Include only the cost heads that the strategy actually uses.

Projected on-hand (MPS grid)

Projected on-hand = Previous on-hand + MPS quantity − Greater of forecast or customer orders

Use the greater of forecast and actual orders in the period when the question says so.

Available-to-promise (ATP)

ATP = Opening on-hand + MPS in the first period − Customer orders until the next MPS receipt

For later MPS periods: ATP = MPS quantity − customer orders until the next MPS receipt.

Gross requirement of a component

Gross requirement = Parent's planned order quantity × Quantity per parent (from BOM)

This is the 'explosion' step. For a component used in several parents, add the requirements from each parent.

Net requirement

Net requirement = Gross requirement + Allocated stock + Safety stock − On-hand stock − Scheduled receipts

Allocated stock is already committed to other orders, so it is added to the requirement. If the result is zero or negative, the net requirement is zero.

Projected on-hand at end of period

Ending on-hand = Opening on-hand + Scheduled receipts + Planned order receipts − Gross requirement

Use it to check that stock never drops below the level you need.

Planned order release timing

Release period = Need period − Lead time

This is called lead-time offsetting. Orders are released earlier than the date the item is needed.

Lot-for-lot

Order quantity = Net requirement of the period

No stock is carried over. It suits expensive items or those with low ordering cost.

Number of Kanbans

N = D × L × (1 + S) ÷ C

D = demand per unit time, L = lead time (same time unit as D), S = safety factor as a decimal, C = container size. Round up to a whole number. Use the form given in the question if it differs.

Gantt progress check

Planned progress to date − Actual progress to date = Lag (if positive)

Measure both in the same unit, such as units or percentage of job. Positive means behind schedule, negative means ahead.

Percentage completion on a Gantt chart

Actual output ÷ Planned total output × 100

Use this when the chart shades the bar by output achieved.

Line of balance position

Balance quantity at a stage = cumulative units that must be delivered by (today's date + the stage's lead-time offset before delivery), read from the cumulative delivery schedule

Compare this balance quantity with the actual units completed at that stage. An earlier stage has a longer lead-time offset, so you read the delivery schedule at a later date. A stage with actual units below its balance quantity is behind.

Capacity utilisation

Capacity utilisation (%) = Actual output ÷ Design capacity × 100

Use the capacity your question names as the base. Some questions use effective capacity instead.

Efficiency

Efficiency (%) = Actual output ÷ Effective capacity × 100

Shows how well the plant performs against what it can realistically achieve.

Effective capacity link

Effective capacity ≤ Design capacity

Effective capacity is lower because of maintenance, setups and similar losses.

Capacity required

Machines required = Total processing hours needed ÷ Available hours per machine

Round up to a whole machine. Use available hours after allowing for downtime if given.

Quick revision

• PPC decides what, how much, when and where to produce, and then controls progress against the plan.
• Job production makes one-off items; batch makes lots; mass makes standard items in large volume; continuous runs non-stop.
• Routing fixes the path and sequence of operations; scheduling fixes the timing; dispatching releases work orders.
• Follow-up (expediting) checks progress and corrects delays.
• Aggregate planning plans output at a broad level over the medium term, before detailed schedules.
• The master production schedule states what end items will be made and when.
• MRP works backwards from the master schedule using the bill of materials, inventory status and lead times.
• MRP II extends MRP to include other resources such as capacity, labour and finance.
• A Gantt chart shows planned versus actual progress of tasks against time.
• Kanban is a card-based pull signal: work is triggered by actual consumption downstream.
• JIT aims to receive and produce only what is needed, when needed, reducing inventory and waste.
• Layouts: product, process, fixed position and cellular; the choice follows the production system and volume.

Common mistakes

• Treating PPC as only scheduling. Fix: Remember scheduling is one part of the action phase. PPC also includes prior planning and control.
• Mixing up routing and scheduling. Fix: Routing decides the path and operations (what, where). Scheduling decides the time (when). Both are in the action phase.
• Calling a firm that makes goods in lots a job producer. Fix: Ask whether the same product is repeated in a fixed lot. If yes, it is batch. If each order is unique, it is job.
• Saying mass production has high flexibility. Fix: Remember that mass production trades flexibility for low unit cost. Changing the product is costly.
• Treating routing and scheduling as the same thing. Fix: Routing is the path and sequence of operations. Scheduling is the time for each operation. Write the question each one answers.
• Describing dispatching as delivering finished goods to customers. Fix: In production control, dispatching means releasing orders, materials, tools and instructions to start work on the shop floor.
• Charging holding cost on production instead of closing stock Fix: Always compute closing stock per period and apply holding cost only on it (or on average stock if the question says so).
• Ignoring opening stock in level production Fix: Net the opening stock and any closing target before dividing.
• Treating the bill of materials quantity as the order quantity for the whole plan. Fix: Always multiply the BOM quantity by the parent's planned order quantity to find the gross requirement.
• Not offsetting for lead time. Fix: The order must be released lead-time periods before the need. Write the release row separately.

Exam tips

• Always give the three phases in order: prior planning, action, control. Examiners look for this structure.
• Use short headed points rather than long paragraphs. Each point with a reason earns separate marks.
• In case-based questions, name the business's own problem and tie each point to it.
• For MCQs, identify whether the activity is planning, action or control. Routing, scheduling, loading and dispatching are action. Follow-up is control. If an option puts routing under planning, check which scheme your study material follows.
• Prepare one line on each link: marketing, purchase, stores, maintenance, quality, finance and HR.
• For 'distinguish' questions, use four to six points in a two-column layout of the same bases for both systems.
• In MCQs, find the clue word first, such as 'customer specification' or 'assembly line', before reading the options.
• State the grouping of intermittent and continuous systems, and add the examples. Examples earn marks.