PRODUCTION PLANNING MODULE

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1 Anar Pharmaceuticals Limited ERP Project In Sales & Distribution Module I had recommended: PRODUCTION PLANNING MODULE 1. Monthly Corporate Sales Budget Process (Refer Sales Budget - page 32) & 2. Macro Finished Goods Inventory Query (Order Management Module - page 16. These two documents will be interlinked with PRODUCTION PLANNING MODULE. Some parts of Sales Budget (mainly District Sales Budget) Macro Inventory information will be useful for deciding the level of production for all brands for coming quarter. The objective of linking these modules to production planning is to take an informed decision on production level of each brand. To take such decision the information on "global inventory level" of each brand and its location is a must. With this information coming from the software system the level of production as well as its timing will be decided. There should be no stock-out situation nor should there be any excessive stockpile. I have related the definition of inventory level to the Budgeted Level of sales for each brand. Through out this note it is the quantities that are kept in mind. The values are indirectly taken care of as units decide values. I am introducing various decision inputs like Lead Time to Manufacture (including Shipment Time), In-Transit Time from Factory to the C&F, Minimum Batch Size of Production, Minimum Shipment Quantity, of minimum inventory required at Factory & at each C&F warehouse, existing inventory within the system etc. These variables will have to be defined by the management while making the quarterly production plan. The endeavour is to reduce level of inventory at each stock-point. If the number of shipments from factory has to increase let it. Investment in finished goods has to go down at every possible outlet. To balance the obsession of reducing investment level, I have introduced In-Transit Time. Longer the time higher the stocking level at that outlet (like Guwahati). I am also of the view that inventory levels for each C&F stock point should be separately defined. The management should also separately define inventory levels at factory. These levels too, are related to the volume of sales expected in coming period. Usually the approach is for a quarterly period. Dealer level inventory is not considered as an input to decision on production levels. Information on dealer level inventory may not reliable, accurate and it may not come at a time when the management wants. Whatever information generated is a deductive logic (as discussed in the Stock Movement Module). Formats Reproduced: To have quick review the formats of Monthly Corporate Sales Budget & Macro Finished Goods Inventory Query are reproduced on the next page. T he Inventory levels queried in the following reports are arrived at after adjusting the "GOODS IN TRANSIT" - from Factory to destination C&F/CA/SS & "ORDERS ON HAND" at each C&F/CA/SS. Hence, these two fields are not to be reproduced. Their effect is already considered when query is fired. Anar Production Planning Module.doc 1 / 11 Production Module

2 Anar Pharmaceuticals Limited ERP Project TEMPLATE FOR MONTHLY CORPORATE SALES BUDGET ANAR PHARMACEUTICALS LIMITED MONTHLY CORPORATE SALES BUDGET MONTHS mmm, mmm, mmm, yyyy Responsibility Center: Name of Marketing Director Designation: These details replicated from State Sales Budget Part - I Targets Received from H.O. QUARTERLY QUANTITATIVE TARGETS State Name Brand Name 1 Brand Name 2 Brand Name 3 Brand Name 4 Brand Name 5 Zone 1 Zone 2 Zone 3 Total Part - II Monthly Targets from Field Staff Summary from the HO's Corporate Sales Budget files. This is noneditable / non-alterable area. It can be only viewed at branches. MONTHLY QUANTITATIVE TARGETS ZONE 1 Brand Name 1 Brand Name 2 Brand Name 3 Brand Name 4 Brand Name 5 Total - 1 Define sum Define sum Define sum Define sum Define sum ZONE 2 Brand Name 1 Brand Name 2 Brand Name 3 Brand Name 4 Brand Name 5 Total - 2 Define sum Define sum Define sum Define sum Define sum ZONE 3 Brand Name 1 Brand Name 2 Brand Name 3 Brand Name 4 Brand Name 5 Total - 3 Define sum Define sum Define sum Define sum Define sum TOTAL FOR CORPORATE Summary Brand Name 1 Brand Name 2 Brand Name 3 Brand Name 4 Brand Name 5 Sum (Mth1) Sum (Mth1) Sum (Mth1) Sum (Mth1) Sum (Mth1) Sum (Mth2) Sum (Mth2) Sum (Mth2) Sum (Mth2) Sum (Mth2) Sum (Mth3) Sum (Mth3) Sum (Mth3) Sum (Mth3) Sum (Mth3) Grand Total Sum (Mth1:2:3) Sum (Mth1:2:3) Sum (Mth1:2:3) Sum (Mth1:2:3) Sum (Mth1:2:3) CORRESPONDING MONTHLY REVENUE TARGETS FOR CORPORATE (Rs. In lacs) Summary Brand Name 1 Brand Name 2 Brand Name 3 Brand Name 4 Brand Name 5 User defined formula (Price * Monthly Total) -do -do- Total Rs. Sum (Mth1:2:3) Sum (Mth1:2:3) Sum (Mth1:2:3) Sum (Mth1:2:3) Sum (Mth1:2:3) PART - III MONTHLY FOUR BRANDS BUDGET IS ON THE NEXT PAGE. Anar Production Planning Module.doc 2 / 11 Production Module

3 Anar Pharmaceuticals Limited ERP Project Part - III Four Brands Monthly Targets from Field Staff MONTHLY QUANTITATIVE TARGETS ZONE 1 Brand Name 1 Brand Name 2 Brand Name 3 Brand Name 4 Total - 1 Define sum Define sum Define sum Define sum ZONE 2 Brand Name 1 Brand Name 2 Brand Name 3 Brand Name 4 Total - 2 Define sum Define sum Define sum Define sum ZONE 3 Brand Name 1 Brand Name 2 Brand Name 3 Brand Name 4 Total - 3 Define sum Define sum Define sum Define sum TOTAL FOR CORPORATE Summary Brand Name 1 Brand Name 2 Brand Name 3 Brand Name 4 Sum (Mth1) Sum (Mth1) Sum (Mth1) Sum (Mth1) Sum (Mth2) Sum (Mth2) Sum (Mth2) Sum (Mth2) Sum (Mth3) Sum (Mth3) Sum (Mth3) Sum (Mth3) Grand Total Sum (Mth1:2:3) Sum (Mth1:2:3) Sum (Mth1:2:3) Sum (Mth1:2:3) CORRESPONDING MONTHLY REVENUE TARGETS FOR CORPORATE (Rs. In lacs) Summary Brand Name 1 Brand Name 2 Brand Name 3 Brand Name 4 User defined formula (Price * Monthly Total) -do- FROM DATABASE -do- Total Rs. Sum (Mth1:2:3) Sum (Mth1:2:3) Sum (Mth1:2:3) Sum (Mth1:2:3) CONSOLIDATED REVENUE TARGET (Monthwise - all brands put together) (Rs. In lacs) Part - II (Management given targets) Quarter Total User defined formula: User defined formula: User defined formula: User Defined Sum of Rupee value Sum of Rupee value Sum of Rupee value formula For in all For in all For in all 4 = brands in Part II - brands in Part II - brands in Part II - Monthly Revenue Monthly Revenue Monthly Revenue Targets above Targets above Targets above Part - III (Own targets) -do- from Part III Monthly Revenue Targets -do- from Part III Monthly Revenue Targets -do- from Part III Monthly Revenue Targets -do- Total for Month Define Sum (I + II) Define Sum (I + II) Define Sum (I + II) Define Sum (I + II) User Date Page no. of Total Pages File Save Anar Production Planning Module.doc 3 / 11 Production Module

4 Anar Pharmaceuticals Limited ERP Project MACRO FINISHED GOODS INVENTORY QUERY A logical derivative of this report could be a macro level query that can generate useful information for production planning. We may call this "MACRO FINISHED GOODS INVENTORY QUERY". This report can encompass every possible location. Instead of printing a list of 2000+dealers or 21 locations of branches / C&F etc; the information could be in 8-10 rows. These rows will include 5 zones (C&F and Dealer category), factory, Third Parties & brandwise vertical sum totals. Brands can be chosen from a list or all brands can be included. The format of report should be as under: FORMAT MACRO FINISHED GOODS INVENTORY REPORT AS ON: QUERY DATE (default System Date) LOCATION Brand 1 Brand 2 Brand 3 Brand 4 Factory East Zone DealerSum West Zone DealerSum North Zone DealerSum South Zone DealerSum Central Zone DealerSum This is a summary report. The figures fetched will represent sum of inventory of each brand selected for all C&F in a Zone & that of all dealers. This report can give more accurate information after the Dealer Stock Movement Report is created & database updated. Third Party 1 Third Party 2 Total Inventory at Macro Level For our purpose we may modify the above format by eliminating the "DealerSum" row. The revised format will be as under: FORMAT FINISHED GOODS INVENTORY REPORT AS ON : QUERY DATE (default System Date) LOCATION Brand 1 Brand 2 Brand 3 Brand 4 Factory East Zone West Zone North Zone South Zone Central Zone This is a summary report. The figures fetched will represent sum of inventory of each brand selected for all C&F in a Zone & that of all dealers. This report can give more accurate information after the Dealer Stock Movement Report is created & database updated. Third Party 1 Third Party 2 Total Inventory Corporate Level Anar Production Planning Module.doc 4 / 11 Production Module

5 Anar Pharmaceuticals Limited ERP Project The Third Party inventories have been included in order to plan their production schedules based on our requirement. If these third parties are not equipped to link to main server today, at least the software should be equipped to welcome them to join at a future date when they acquire capability. MECHANISM TO START PRODUCTION PLANNING Completed Actions: 1. Monthly Corporate Sales Budget is already prepared. 2. Macro Finished Goods Inventory is queried. Actions to be taken now: 1. Decide inventory levels based on the new sales plan (quantities). Plan the C&F Inventory Levels based on the format discussed on the following pages. Plan the Factory Inventory Levels (including third party) based on the format discussed on the following pages. Sum up both these levels to arrive at Required Inventory Levels. Compare the Required Inventory Levels with the Existing Inventory Levels at factory & all C&F locations. 2. Work out a Production Level Plan on overall quarter basis. Then break up the quarterly plan into monthly production plan. Anar Production Planning Module.doc 5 / 11 Production Module

6 Minimum Inventory Plan I. At each C&F Depot C&F DEPOT INVENTORY PLANNING C&F Name (from ) Budget Quarter MMM, MMM, MMM, YYYY Select View: No. of units OR Cases Brand Name Budget Total No. of Days of Inventory Sales During Preceding Dates Investment in Inventory Based QTY No. of Months In-Transit Time from Local No. of Days of Inventory Total Days Qty of Inventory 2/3*6/30 days Start Date End Date Qty Sold on (Rs. in lacs) Sales Price Budgeted Cost Brand 1 Brand 2 Brand 3 User Defined Formula Formula User Defined User Defined The above sheet will be prepared for each C&F separately. If there are 20 C&F, there will be 20 such sheets. The Budgeted Figures should be based on Quarterly Budgets so as to adjust the inventory levels based on the latest market conditions. If Budget is revised then the latest revision should be considered. The Budget Columns represent ALLOCATED BUDGET. This is sum of the district level brandwise budgets falling within the jurisdiction of the respective C&F. While creating database structure for Sales & Distribution, relationship will have to be defined between the C&F & Names of Districts they will cater to. The RELATIONAL DATABASE PRINCIPLE will, then, allocate the Corporate Quantitative Budget into inter-related districts with the respective C&F locations. There won't be two C&F catering to same district. The corporate budget will be split into smaller district budgets. These district budgets will be added up to firm up the targets for the C&F who is responsible to cater to these districts. The sum of all C&F allocated budgets will equal the Corporate Budget. To judge the latest market conditions that affect the C&F, Column "Sales During Preceding Dates" has been defined. The user can query database to find out what is the latest sales pattern (busy season as well as off-season) between two dates defined by him. Slower movement at a specific C&F will indicate lower level of inventory. Column 7 indicates Qty of Inventory of a particular brand. This gets decided by the lead-time to receive shipment from Local & no. of days of inventory to be stored at C&F warehouse. The user will define "No. of days of Inventory" in Column 5. This will change dynamically based on the season & pace of turnover. This document should be editable to change the planned inventory levels whenever the user wants to adjust the inventory levels to market conditions. Investment in inventory is at two variables: 1. At Selling Price for that C&F region, and 2. At Budgeted Standard Cost. This will outline the commitment of funds by the management at every C&F center. Let the user choose whether he wants the document translated in No. of Units or in No. of Cases. Anar Production Planning Module.doc 6 / 11 Production Module

7 II. At Factory, Local (as well as Third Party) FACTORY INVENTORY PLANNING Brand Name Corporate Sales Budget BUDGET QUARTER MMM, MMM, MMM, YYYY Total No. of Days of Inventory Production Lead Time (including shipment time) No. of Days of Inventory at Factory Warehouse Total Days of Inventory Qty of Inventory Shipments from Factory During Preceding Dates Qty No. of Months No. of Days No. of Days Start Date End Date Qty = =6*2/3/ User Defined Formula Formula User Defined User Defined III. SUMMARY OF MINIMUM INVENTORY REQUIREMENT AT ALL LOCATIONS MACRO INVENTORY PLANNING FOR BUDGET QUARTER: MMM, MMM, MMM, YYYY Qty in No. of Units or No. of Cases Sr. No. 1 Factory 2 C&F 1 3 C&F 2 4 C&F 3 Location Brand 1 Brand 2 Brand 3 Brand 4 Brand 5 Brand 6 Brand 7 Brand 8 Brand 9 Brand 10 Brand 11 Brand 12 5 C&F 4 Total Sum of all Locations Anar Production Planning Module.doc 7 / 11 Production Module

8 IV. MONTHLY & QUARTERLY PRODUCTION REQUIREMENT BASED ON INVENTORY LEVELS: There will be two levels of requirement: 1. Overall Production Requirement for the Whole Quarter; and 2. Production Requirement for Each Month in the quarter. Please refer to the following formats: OVERALL PRODUCTION REQUIREMENT FOR QUARTER (mmm, mmm, mmm, yyyy) FORMAT Report Date: system date Particulars Brand 1 Brand 2 Brand 4 Brand 5 Brand 6 Brand 7 Brand 8 Brand 9 Brand 10 Brand 11 Location: Factory Actual Inventory on Report Date $$$ A Required Inventory Level B Balance to be Manufactured (B - A)%%% C Location: C&F ### Actual Inventory on Report Date $$$ D Required Inventory Level E Balance to be Manufactured (E - D)%%% F Budgeted Sales G C + F + G H This Statement gives brandwise quarterly plan. A translated monthly plan is on the next page. ### All C&F combined figure (no individual information) %%% If there is excessive inventory within the system, (greater than Required Level), then "C = B - A" can be a negative figure. $$$ These figures are arrived at after adjusting Goods-In-Transit & Orders-On-Hand. Anar Production Planning Module.doc 8 / 11 Production Module

9 The above format will give overall production level to be achieved during the quarter. However, to control the levels of inventory of finished goods, the production has to be scheduled based on the monthly sales forecast. Recall that the sales personnel give their monthly quantitative budget for each brand. We also have the Monthly Corporate Sales Budget giving monthwise quantities of each brand separately. To arrive at the monthly production plan we can deploy the same logic as outlined in the above table. IMPORTANT: The level of production in the first month may look very high due to large difference between the inventory required and actual inventory on hand at the beginning of new quarter. This will be especially true when there is a significant jump planned in the new quarter as compared to the old one. With increased turnover, inventory levels are also expected to be high. Usually, in seasonal brands this will be the case. Format for Monthly Production Requirement is shown below. I suggest this document is prepared separately for each brand due to space constraints. MONTHLY PRODUCTION REQUIREMENT (mmm, mmm, mmm, yyyy) FORMAT Report Date: system date Brand Name Particulars Location: Factory Actual Inventory on Report Date $$$ Required Inventory Level B Balance to be Manufactured (B - A) C Location: C&F ### Actual Inventory on Report Date $$$ Required Inventory Level E Balance to be Manufactured (E - D) F Budgeted Sales G To be Manufactured in Month C + F H ### All C&F combined figure (no individual It is for the that the inequity between Required Inventory Level & Actual Inventory Level exists. When the adjustment between the two levels takes place, it is the Required Level of Inventory that becomes the Opening Inventory for the. Green Arrow indicates that Required Inventory Level of becomes the Actual Anar Production Planning Module.doc 9 / 11 Production Module

10 Level in. Therefore, there won't be any additional production required for removing the inequity. This also means that the level of production will be the same as the budgeted sales level. $$$ These figures are arrived at after adjusting Goods-In-Transit & Orders-On-Hand. Analysis of Inventory levels: No. of Days Viewpoint It is important to track the levels of inventory in relative terms, i.e. in relation to the latest sales figures. This is done by finding the number of days of inventory on hand as compared to the volume of average sales generated in last 30 days. This analysis is to be made on two major locations. One, at factory, where we relate the stock at factory warehouse in relation to corporate sales in respective brands & two, at each C&F location. The following formats illustrate how this evaluation is to be done. ANALYSIS OF INVENTORY AT FACTORY WAREHOUSE: FORMAT Analysis of Inventory levels: No. of Days Viewpoint: Factory Level Location Factory Report Date Qty in cases Brand Name Planned Inventory from Minimum Inventory Plan AAA Brand 1 Brand 2 Brand 3 Inventory on Hand Qty BBB Average Daily Sales for last 30 days (Qty) CCC Inventory DDD Production Lead-time EEE A B C D = B / C E F = D - E Net Days Budgeted Sales Qty for the next month FFF AAA This is derived from the Minimum Inventory Plan Document discussed in the beginning of this chapter. BBB This is inserted from Stock Movement Monitor. Qty of inventory on hand for each brand is imported here. CCC This is average daily sales qty of each brand nationwide for company as a whole for last 30 days. DDD This figure is arrived at by figures in Col. B by those in Col. C. EEE Production Lead-time is same as the variable defined in FACTORY INVENTORY PLANNING DOCUMENT already discussed in this chapter. FFF This figure is inserted from the Corporate Monthly Budget. This will represent what is the budgeted qty for the next month. This will give an idea about the level of activity in a particular brand. This information is necessary due to seasonal effect on the targets of a particular brand. E.g. knowing targets for April for DermiCool in March must be essential, as there will be fillip in sales. In case the factory is running smaller inventory due to winter effects in March, this information wants you to pull up your socks! I HAVE PRESUMED THAT BUDGETARY PROCESS WILL ALWAYS BE COMPLETED AT LEAST ONE MONTH IN ADVANCE BEFORE THE QUARTER ENDS. THIRD PARTY WAREHOUSES SHOULD BE DEFINED SEPARATELY AS THEIR FG STOCK COULD BE SEPARATELY LYING AT APL LOCAL FACTORY. ANALYSIS FOR C&F IS ON THE NEXT PAGE. Anar Production Planning Module.doc 10 / 11 Production Module

11 ANALYSIS OF INVENTORY AT C&F WAREHOUSE FORMAT Analysis of Inventory levels: No. of Days Viewpoint: C&F Level Location C&F NAME Report Date Qty in cases Brand Name Planned Inventory from Minimum Inventory Plan AAA Brand 1 Brand 2 Brand 3 Inventory on Hand Qty BBB Average Daily Sales for last 30 days (Qty) CCC Inventory DDD Shipment Lead-time EEE A B C D = B / C E F = D - E Net Days Budgeted Sales Qty for the next month FFF The legends (AAA, BBB ) remain the same as described above except that these are related to the respective C&F. For C&F it is the Shipment Lead-time (Col. E) that is more relevant than production time. ANALYSIS OF INVENTORY AT THIRD PARTY WAREHOUSE Third Party is defined as Job Worker (Green Pharma and Lincoln Pharma). The analysis will be limited only to the brands they manufacture for APL. Col. E will read Production Lead-time, as the third party is a production center. FORMAT Analysis of Inventory Levels: No. of Days Viewpoint: Third Party Level Location THIRD PARTY NAME Report Date Qty in cases Brand Name Planned Inventory from Minimum Inventory Plan AAA Inventory on Hand Qty BBB Average Daily Sales for last 30 days (Qty) CCC Inventory DDD Production Lead-time EEE A B C D = B / C E F = D - E Brand 1 Nationwide sales Brand 2 Net Days Budgeted Sales Qty for the next month FFF Anar Production Planning Module.doc 11 / 11 Production Module

MATERIAL PROCUREMENT PROCESS PRODUCTION PLAN. Month 1 Month 2 Month 3 Total Qtr 1

MATERIAL PROCUREMENT PROCESS PRODUCTION PLAN. Month 1 Month 2 Month 3 Total Qtr 1 MATERIAL PROCUREMENT PROCESS I. Finalise Production Plan. The format is as following: PRODUCTION PLAN Brand Name B1 B2 B3 Qtr 1 Month 1 Month 2 Month 3 Total Qtr 1 Qtr 2 Qtr 3 Qtr 4 Total Quantity logic