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Tractor Industry

1.1 Global Tractor Industry

The global spotlight on Tractor manufacture certainly in terms of unit volume seems to be
swinging away from the USA, UK and Western and Eastern Europe towards India and China
where growth in the number of producers and the total volume in recent years have been

Country Volume %
India 2,40,000 31
USA 1,90,000 25
China 95,000 12
Sri Lanka 5,000 2
Australia 10,000 1
Europe 1,75,000 23
Pakistan 45,000 6

Table 1. Production Volume around world

1.2 Indian Tractor Industry

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The tractor industry, in India, has completed, more than, 25 years During this period, there
has been a large growth, in it's production capacities and capabilities A wide choice of
competitive models, ranging from 12 to 75 HP, is now available, to the farmer. The tractor
industry, represented by the successful units, has now attained a maturity, as judged by it's,
capacity and capability, to expand production, as and when, needed, to meet any sudden
surge in demand The successful units have, also, developed, expertise and capability, for
effecting horizontal transfer of technology, to other developing countries.

Tractor density
India 11 per 1000 hectares
US 27 per 1000 hectares
Global average 19 per 1000 hectares
Average HP per hectare
India 0.4
Developing Countries 0.9
Developed Countries 2.6
World 1.4

Table 2. Tractor Density and Average HP per hectare

Agriculture still accounts for 25% of country’s GDP and engages 60% of the population in
employment. Average CAGR of tractor industry has been 8% over the last 3 decades. Tractor
population is concentrated in just 10% of our villages. Even today 70% of villages do not
have a tractor. There is large untapped potential – it is a growth industry for at least next 15

Players in Indian tractor industry are Balwan Tractors, Force Motors Ltd, Captain Tractors
Pvt. Ltd, Crossword Agro Industries, Eicher, Escorts (Escort, Powertrac and Farmtrac), Ford
Tractors, HMT Tractors, Indo Farm, John Deere, Mahindra Gujarat Tractor Limited,
Mahindra & Mahindra, MARS Farm Equipments Ltd, New Holland, Preet Tractors, Punjab
Tractors Ltd (Swaraj Tractors),Same Deutz-Fahr Ltd, Sonalika (International Tractors Ltd.),
Standard, TAFE, VST Tillers.
Year Number
1999 – 2000 2,57,998
2002 – 03 1,71,657
2003 – 04 1,90,348
2004 – 05 2,47,531
2005 – 06 2,92,908
2006 – 07 3,12,450

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2007 – 08 3,30,758
Tamil Nadu 7%
7% MP
Maharashtra 16%

Karnataka Rajasthan
9% 10%
Gujarat Punjab
9% Haryana Bihar 5%
6% Fig 2. Tractor Sales in India by States 4%

Table 3. Size of Indian Tractor Industry

2. Company Profile

The genesis of Escorts goes back to 1944 when two brothers, Mr. H. P. Nanda and Mr. Yudi
Nanda, launched a small agency house, Escorts Agents Ltd. in Lahore. Over the years,
Escorts has surged ahead and evolved into one of India's largest conglomerates. In this
journey of six decades, Escorts has had the privilege of being associated with some of the

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world leaders in the engineering manufacturing space like Minneapolis Moline, Massey
Ferguson, Goetze, Mahle, URSUS, CEKOP, Ford Motor Company, J C Bamford Excavators,
Yamaha, Claas, Carraro, Lucky Goldstar, First Pacific Company, Hughes Communications,
Jeumont Schneider, Dynapac . These valued relationships be it technological or marketing,
are highly cherished experiences treasures, which have helped escorts inculcate best in class
manufacturing practices and to emerge as a technologically independent world class
engineering organization.

1944 - Launch of Escorts (Agents) Ltd.

1948 - Pioneered farm mechanization in the country by launching Escorts Agricultural

Machines Limited, with a franchise from the U.S. based Minneapolis Moline, for marketing
tractors, implements, engines & other farm equipment. Launch of Escorts (Agriculture and
Machines) Ltd.

1951 - Escorts established India’s first private Institute of Farm Mechanisation at Delhi.

1953 -Escorts (Agents) Ltd. and Escorts (Agriculture and Machines) Ltd. merged to form
Escorts Agents Pvt Ltd.

1958 - Started importing Massey Ferguson tractors from Yugoslavia for marketing the same
in India.

1960- Set up of Escorts Limited.

1961- Setting up of manufacturing base at Faridabad for manufacture of tractors in

collaboration with URSUS of Poland and 50% indigenous components. Launch of Escort
brand of tractors.

1969 - Escorts Tractors Limited was born. A technical and financial joint venture with the
global giant Ford Motor Company, USA, to manufacture Ford tractors in India. The years
ahead saw Escorts grow as the largest tractor manufacturer in India.

1971 - 1st February, the first tractor FORD 3000 rolled out of the factory.

1974 - Crossing national boundaries, Escorts exports for the first time. After winning a global
tender, 400 tractors were exported to Afghanistan, which was perhaps the world's largest ever
airlift of tractors.

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1976 - FORD 3600, an advancement in Farm Mechanisation launched. Trial production of in-
plant manufacturing of engine parts (Block & Head).

1977 - Escorts enters the world of self-developed technology by setting up its first
independent R&D Center. Escorts Scientific Research Centre marked its beginning at
Faridabad by developing its own Engines for E-27 and E-37. Due to constant technology
absorption, indigenisation level touched 72% for FORD tractors. 2nd plant at Bangalore for
manufacturing piston assemblies was set up.

1983 - Escorts Tractors Limited (ETL) established a state-of-the-art research and

development centre to spearhead newer breakthroughs in Farm Mechanisation and to
maintain industry leadership. Line concept introduced for engine block machining. 11,000
ton floating dry-dock Escorts I launched.

1985 - Escorts Tractors Limited (ETL) offered its first Bonus Issue (1:1).

1990-91 - First Public Issue in February 1991, over-subscribed four times. Shares listed on
Delhi and Bombay Stock Exchanges.

1993 - FORD 3620 tractor launched.

1996 - Launch of FARMTRAC Tractor.

1998 - POWERTRAC series of tractors launched.

2004 - TS16949 certification for Agri Machinery Group.

2.1 Agri Machinery Business:

Domestic Tractor Industry during the period October-September, 2008 grew by 3%. The
Company continued to maintain its market share at 14%. Exports Tractor Industry grew by
12% mainly due to the outsourcing of tractors by the MNCs who have set up its base in India
for outsourcing. Tracking the depreciating dollar value and recession in US, your Company
made a conscious and proactive decision to deliberately pull back its exports in the US. This

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resulted in a sharp decline in the export of your Company from 5468 tractors to 1401tractors.
The surge in the capital infl ow contributed to a sharp appreciation of Indian Rupee
particularly against the US Dollar resulting in very thin margins and lower demand due to
recession in the US/European markets.

2.2 Escorts Agri Machinery Group Supply Chain

The following diagram gives a high level Supply Chain Structure of Escorts Ltd.



PL1 +





Fig 4. Supply Chain Structure of Escorts Ltd

2.3 Products

The Agri Machinery Group (AMG) of Escorts has three tractor brands, which are on distinct
and separate technology platforms.

1. Farmtrac: Single reduction and epicyclic reduction transmissions from 34 to 75 HP. This
brand is also exported.

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2. Powertrac: Utility tractors, offering straight-axle and hub-reduction tractors from 34 to
55 HP.

3. Escort: Economy tractors having hub-reduction transmission and twin-cylinder engines

from 27 to 35 HP

Each of the Brands has about 5-6 models and total of about 200 variants. The variants for one
model essentially have similar key features but are differentiated in terms of peripheral
features (PTO, Clutch Type, Steering type etc), Aesthetics and country specifications

In addition Escorts also manufactures the engines for gensets & spares for the tractors.

2.4 Sales & Marketing

Sales at Escorts is divided into 3 entities viz: Domestic Business, Exports Business & New
Business Lines (NBL)

2.4.1 Domestic Business

As seen from the Supply Chain diagram, the Escorts tractor business operates in a Build To
Stock mode. The tractor stock is held in the channel by Dealers & Depots. All Depots are
linked to the stockists who are mainly providing financing for holding the tractor inventory.
Escorts still controls the release of the stock held by the stockist to dealers or distributors.
The tractors are distributed to the dealers based on their requirements either directly or
through distributors. Only a specified set of dealers can obtain stock both from the Depots &
Distributors. Other dealers have to necessarily source tractors from the Escorts Depots. All
over India Escorts has about 1000 dealers.

Out of the 1000 dealers some dealers are big and can hold substantial stock themselves but
many dealers are small and do not have the financial strength to hold stock levels required to
service customers effectively. For these dealers a distributor is set up so that he can hold the
stock for the dealers and supply as and when needed by the dealer to service a customer

Escorts Sales infrastructure consists of 33 Area Offices which support the sales & logistics
from the depot to dealers & distributors. However the billing happens only at the head office.
The logistics team sits at the head office and controls the distribution of the tractors from the
Plant to the Depots.

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Fig 5. Distribution Terminologies

2.4.2 Exports Business

Escorts export business works through 4 types of demand channels viz: Distributors for each
country, Institutional Sales for one off government orders, Direct Buyer who can in future get
transformed to a distributor & Escorts Subsidiary in Poland. For all these demand channels
except for the EL subsidiary the production can be done only after receiving either advance
payment or LC for the sale.

The main differences between domestic & exports tractors are in terms of Power Steering,
Dual Clutches, Bigger Tires and Rotary Pumps

2.4.3 New Business Lines

The AMG New Business Lines currently focuses on the sales of engines for many
applications. But 99% of the business is for the engines used in Gensets. Other sale comes for
the engines used in applications like pump-sets & concrete mixers. There are plans to
increase the sale of engines for other industrial applications. The main difference in the
engines used in tractors and NBL are that these are fixed RPM engines hence components
like flywheel, flywheel housing, radiators and fuel injection pumps are different.

The capacity for NBL engines will be ramped up to 1000 per month. The target sale of the
engines including the gensets is 8700 for the coming year. Currently, there are about 20
running accounts of dealers / OEMs and 2 corporate accounts (Lumbardini and FG Wilson)
for the sale of genset engines.

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3. Manufacturing Facilities

The manufacturing operations for all Brands of tractors are spread across four plants viz:
Plant1, Plant2, Plant3 & CHD. The operations for the Farmtrac & Powertrac brands have
some differences and each is described below.

3.1 Farmtrac

Fig 6. Farmtrac Component Flowchart

All of the Farmtrac manufacturing operations happen at Plant2

This is divided into 4 Production Units (PU) viz: Engine PU, Rear Axle PU, Transmissions
PU and Tractor Assembly PU.

3.1.1 Engine PU:

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The Engine PU comprises of Engine assembly, Cylinder Block Machining Line, Cylinder
head Machining Line & Connecting Rod Machining Line. The Engine PU assembles engines
for use in the Tractor PU. Major bought out parts (BOPs) include Fuel Injection Pump,
Camshaft, Clutch Assembly and Intake Manifold. These BOPs generally vary depending on
the engine model.

For Cylinder Block, 4 types are machined on the same line and for Cylinder Heads, 2 types
are machined on the same line. One type of cylinder block is machined in Plant 1. Only one
type of Connecting Rod is machined in this PU.

The crankshaft is one of the critical components for engine assembly. There are three types of
crankshafts used out of which one is machined in CHD while for others subcontracting is
used to machine the crankshaft.

Engine Assembly is straightforward and no issues until the material for assembly are

Operation Operation Setup Cool-down Batch Thru-

Lead Time Time Time Sizes Put

Engine 2.5 - - - 84

Engine Testing 1.15 - - - 84  77

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Engine Dress-Up 0.5 - - - 84

Cylinder Block 5.5 6 - 300- 52  41

Machining 350

Cylinder Head 4.5 5.5 - 200- 49  45

Machining 250

Connecting Rod 2.5 - - - 60  58



Table 4. Operation Chart of Engine PU

3.1.2 Rear Axle PU:

The Rear Axle PU comprises of Rear Axle assembly, Center Housing Line, Trumpet Housing
Line & Rear Axle Shaft Line. The Rear Axle PU assembles rear axle assembly for use in the
Tractor PU. Major bought out parts (BOPs) include Brake, Crown Wheel & Pinion. There is
little variation in the factory made parts (FMPs) across models.

2 Lines are available for LH & RH Trumpet Housing. The 3rd line is used for 65 EPI tractors.
Center Housing has no constraints. The Spline Milling Machine is a big bottleneck and need
to run for 3 shifts.

Assembly of transmission has no constraints except timely availability of Material.

Operation Operation Setup Cool-down Batch Thru-Put

Lead Time Time Time Sizes

Rear Axle - - - 84

Center Housing 6 - - - 62

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Trumpet Housing 5 - - - 62

Rear Axle Shaft 6 - - - 56


Table 5. Operation Chart of Rear Axle PU

3.1.3 Transmissions PU:

The Transmissions PU comprises of Transmissions assembly, Case Transmission Line, Small

Castings Line, Spindle Line, 4 Gear & Shaft Machining Lines & Heat Treatment. The
Transmissions PU assembles the transmissions for use in the Tractor PU. Major bought out
parts (BOPs) include Special Purpose Gears, Hubs and Cover & Lever Assembly.

The Case Transmission and the Spindle lines are largely dedicated lines with same
components running on the machines most of the time.

The gears and shafts lines make more than 40 types of components. There are 4 Lines for
gear manufacture & 1 line for Spindles. These lines are characterized by batch production
since the set-up times are sizeable. Most Gears undergo heat treatment which is a batch
process and has sub activities of heating, cool down & shot blasting. There are 2 types of
furnaces 2 of each type. The production capacity is set in terms of number of tractors and
hence the 65 EPI models which have higher number of gears constrain the production.

Operation Operation Setup Cool-down Batch Thru-Put

Lead Time Time Time Sizes

Transmissions - - - 84
5 – 65 EPI

Case Transmission 6 - - - 56

Small Castings 6 - - - 90

Spindle Line Varying - - - 57 Tractors

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Gear & Shaft Varying 2 - 100 - 57 Tractors
Machining Lines 500

Heat Treatment 10 - 2 80 – 100 80 – 100

Table 6. Operation Chart of Transmission PU

3.1.4 Tractor PU:

The Tractor assembly line has 4 major parts viz: Buckle-Up, Before Paint, Paint & After
Paint. Buckle-Up is the Backend Assembly. Before Paint is assembly of Engines, Backend &
Other BOP sheet metals. Major BOPs are Crankshafts, Radiators, Tyres, Fender and Sheet
Metals.The Tractor PU assembles the tractors after which the tractors are tested, reworked if
necessary and dispatched.There are some constraints that higher end models like 70 DT & 80
DT can be max 10 per shift.

Operation Operation Setup Cool-down Batch Thru-Put

Lead Time Time Time Sizes

On Line 10.5 - - - 80

Off Line 2 - - - 80

Table 7. Operation Chart of Tractor PU

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3.2 Powertrac

Fig 7. Powertrac Component Flowchart

The manufacture of the Powertrac brand is distributed across three plants viz: Plant1, Plant3
and Crankshafts & Hydraulics division (CHD) and multiple PUs in each plant viz: Plant1 –
Castings PU, Plant1 – Transmission Components PU, CHD – Crankshafts PU, CHD –
Hydraulics PU, Plant3 – Backend PU, Plant3 – Engine PU and Plant3 – Tractor Assembly

3.2.1 Plant3 – Engine Assembly:

This PU controls the assemblies of the engines. The major FMP in this PU is the cylinder
block which comes from Plant 1 and the major BOPs for this PU include Cylinder heads,
Connecting Rods, Fuel Injection Pump, Camshaft, Clutch Assembly and Intake Manifold.

Operation Operation Setup Cool- Batch Thru-

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Lead Time Time down Sizes Put

Engine 2.5 - - - 84

Engine Testing 1.15 - - - 84  77

Table 8. Operation Chart of Plant3- Engine Assembly

3.2.2 Plant3 – Backend Assembly:

This PU controls the assemblies of the backend which includes the assembly of transmission,
hydraulics & rear axle. The major FMP for this PU are the Gears & Shafts, Center Housing,
Case Transmission and Hydraulics. The major BOPs in the PU are Trumpet Housing, Rear
Axle Shafts, Special Purpose Gears, Hubs and Cover & Lever assembly

Operation Operation Setup Cool- Batch Thru-

Lead Time Time down Sizes Put

Backend - - - 94

Table 9. Operation Chart of Plant3- Backend Assembly

3.2.3 Plant3 – Tractor Assembly:

The Tractor assembly line has 3 major parts viz: Before Paint, Paint & after Paint. Before
Paint is assembly of Engines, Backend & Other BOP parts. Major BOPs are Radiators, Tyres,
Fender and Sheet Metals.

The Tractor PU assembles the tractors after which the tractors are tested, reworked if
necessary and dispatched. .

Operation Operation Setup Cool- Batch Thru-

Lead Time Time down Sizes Put

On Line 6.5 - - - 90

Off Line 4 - - - 90

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Table 10. Operation Chart of Plant3- Tractor Assembly

3.2.4 Plant1 - Castings PU:

This comprises of Machining of engine blocks, differential housing and gearbox housing.
After machining, these components are sent to Plant 3 for assembly.

There are 2 machining lines for engine blocks. One line is dedicated to production of
differential housing. There are two parallel lines with machines on both sides of the conveyer
line for production of the gearbox housing.

3.2.5 Plant1 – Transmission Components PU:

There are 12 production lines at Plant1. The heat treatment furnace is being treated as a
separate line. These production lines have been assigned to 34 groups of items being

This PU has High lead times – the manufacturing lead time under the existing working
arrangement is in the range of 30 hours to 50 hours, High batch quantities – batch sizes of
300 and 500 are being used at various resources. Many resources are shared due to capacity
constraints and have Variable run times – even on same resource the run times would vary
depending on the item that is being processed on that resource.

The production lines have been so configured so that each line is dedicated for a given
category of parts. Sharing of resources, though technically possible, is however restricted.

3.2.6 CHD – Crankshafts:

This unit is engaged in the production of crankshafts which are supplied to the engine PU.
Different types are required for 2, 3 & 4 cylinder engines.

There is a single manufacturing line at this unit for production of crankshafts

The crankshafts are transported regularly to Plant3 in multiples of 66 pieces. Shipments can
be made daily depending on the plant3 requirements as the two units are located
approximately 10 kms from each other.

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4. Planning And Scheduling

Planning and Scheduling are one of the most underutilized areas of opportunity for
manufacturing competitiveness. Planners make decisions which have a major impact on the
company’s performance on a day-to-day basis. They make these decisions without proper
tools to provide them with correct information on the shop floor, or to provide visibility of
the effect of their decisions on factory performance.

Factory Planner, is a set of tools for Master Production Planning, Master Production
Scheduling, Material Requirements Planning, Capacity Requirements Planning, and Dynamic
Finite Scheduling. These tools are made available through a graphical user interface (GUI),
consisting of pull down menus which access each function of Factory Planner. Factory
Planner enables rapid what-if analysis and not only does it identify problems but solves them
as well. It also allows you to interactively solve problems. An important aspect of Factory
Planner is the efficiency of its algorithms for heuristic optimizations. It acts as a cementing
agent for formalizing synchronous flow production.

Factory Planner simultaneously considers material and capacity constraints, when developing
the finite capacity master production schedule, by using a technique called Constraint
Anchored Optimization (CAO), a technology which focuses on constraint anchored
optimization. A constraint is anything which limits the performance of a system. A constraint
can be a resource such as, a work center with limited capacity as well as material such as, a
part which prevents the completion of an order. Constraints are dynamic and interdependent.
They may change based on the demand pattern or product mix. CAO optimizes overall
performance of the system by considering the trade-offs among conflicting objectives.

Factory Planner is an intelligent planning and scheduling system with the

following properties:
• Decisions are based on the latest shop floor information.
• Incremental adjustments may be made without complete rescheduling.
• High quality decisions are made in limited time using domain knowledge.
• Domain knowledge is used to focus the search in areas with a high possibility of
yielding good solutions. Important decisions are separated from unimportant decisions
(few scheduling systems have this capability).

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• Decisions are made at the appropriate temporal level. Planning is performed for a
longer horizon and scheduling for a shorter horizon. If detailed scheduling decisions
are made too early, fluctuations or dynamics of the shop floor will render those
decisions invalid. The scheduling horizon depends on the benefits of predictive
scheduling and the stability of the environment.
• Hard constraints are not violated. Soft constraints are relaxed in a manner which best
achieves system goals.
• The system and the planning / scheduling procedures are flexible and accommodate
new goals, constraints and operating conditions.

Factory Planner works to:

• Increase profitability by:
o reducing manufacturing lead time
o increasing on-time performance
o reducing work in process
• Increase the service level offered to customers by having the capability to react
quickly to changes.
• Synchronize production plans and schedules with the real-time changes in customer
demands, resource status and material availability.
• Manage capacity and inventory buffers through its planning and scheduling

Core Functionality
Factory Planner has at its core, several basic functions, they are:
• Material Planning
• Inventory Allocation
• Infinite Capacity Planning
• Procurement Planning
• Finite Capacity Planning Using CAO
• Dynamic Finite Capacity Scheduling

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• Dynamic Due Date Quoting

5. Supply Chain Management

5.1 Supply Chain :

5he supply chain encompasses all activities associated with the flow and transformation of
goods from the raw materials stage (extraction), through to end users, as well as the
associated information flows. Material and information flows both up and down the supply
chain. The supply chain includes new product development, systems management, operations
and assembly, purchasing, production scheduling, order processing, inventory management,
transportation, warehousing, and customer service. Supply chains are essentially a series of
linked suppliers and customers; every customer is in turn a supplier to the next downstream
organization until a finished product reaches the ultimate end user.

5.2 What is SCM ?

5.2.1 Supply Chain Management (SCM):

SCM is the integration of all the activities in the supply chain to achieve a sustainable
competitive advantage. Supply Chain can be broadly classified of comprising of three
networks – Supplier, Firm and Distribution. The supplier network consists of all
organizations that provide inputs, either directly or indirectly, to the focal firm (i.e., the
purchaser). Focal firms network is involved in the conversion of input material to the output
material. The distributive network consists of all downstream organizations from the focal
firm that ensure that the right quantity of goods is delivered to the appropriate customer
location in a timely manner.

5.2.2 Elements of Supply Chain

Following are the key elements in Supply Chain Management:
� Customers
� Producers (includes Retailer, Distributor, Manufacturer)
� Suppliers
Customers, Producers and Suppliers can be interconnected in the Supply chain as

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Fig 8. Supply chain Elements
5.2.3 Interrelationship of the elements

� A number of companies can be linked in the supply chain network.

� A supplier to one manufacturing facility can be a customer to another manufacturing
facility and so on.. hence a number of supplier / customer relationships exist in the supply
chain network.
� A number of intermediaries (distributors, wholesalers, retailers etc.,) form part of the
supply chain network.
In defining the supply chain network and the integrations between the elements, the
following decisions must be made
� Identifying the key supply chain elements in the network to link the processes.
� Identifying the processes that are to be linked with the key elements.
� Identifying the level of integration and management control to be applied for each
of the processes.

5.3 Manufacturing Resource Planning (MRP II)

5.3.1 Objectives
The base block of any company is the strategic business plan. The strategic business plan
incorporates the plans of marketing, finance, and production. Marketing must agree that its
plans are realistic and achievable. Finance must agree that the marketing plan is financially
viable, and production must agree that it can meet the desired demand. The manufacturing
planning and control system is a master game plan for all functions of the company. This
fully integrated planning and control system is called “manufacturing resource planning-
II” or MRP-II. “II” to differentiate it from MRP i.e. Materials requirement planning. The
MRP-II activities in the below diagram can be roughly broken up in to three parts.

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The front end : These activities consist of production planning and Master production
schedule. These are basically the plans on which your whole system will be based.

The engine : These consist of Materials requirement planning (MRP), Detailed capacity
planning (CRP), and its result detailed material and capacity plans.

The Back End : It consists of the shop floor control system and the vendor plans. This is
where the action takes place, and all the detailed planned is brought into fruition.Monitoring
is very important and any deviation has to report “up” to keep priorities current.

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Fig 9. MRP II Flowchart

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5.3.2 Principles and Characteristics
Integrated Planning Structure

Fully integrated: The MRP-II system is intended to be a fully integrated system that works
from top down and has feedback from bottom up. Taken up with simulations it is a top
management-planning tool. MRP-II requires all functions to interact through this system, any
change in plan in any of the functions requires validation through MRP-II.

Cross-functional Integration

Coordinate between functions: MRP-II is fully integrated and cross functional in nature.
MRP-II provides coordination between marketing and production. All the functions viz.
Marketing, Finance and Production agree on a workable plan, which is the production plan.
Marketing and production must work together on a daily or weekly basis to adjust the plan as
changes occur. Generally this kind of changes is made through MPS, however care must be
taken to respect the time fences when any changes are made to meet the customer demand.
The nature of changes could be from changing the batch size to order cancellation or delivery

Closed Loop – Feedback

Feed back loop: As seen from the diagram MRP-II provides feedback from within its
various parts, making it closed loop. At every stage resource availability, through modules
like, rough cut capacity planning (RCCP), Capacity resource planning (CRP) is checked. Any
deficit or inability to make the priority true calls for a change in plan or some alternate means
to meet the demand.

What – if Simulation

Simulations: Another ability of MRP-II system is a what-if analysis. This tool can be used
early in the planning stage to find out what resources are required beforehand. Forewarned
being forearmed. This can be done by simulating the desired conditions and getting to know
the effect of pre-supposed conditions down the line on say a critical resource like material, or
a work center or for that matter on capacity.

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6. Project Scope
The scope of Factory Planner at Escorts AMG is as follows –

• Synchronized Production & Procurement Planning

• Planning to respect Production & Procurement Constraints

• FP Planning Cycle Time Reduction

• Simulation / Re-Planning Capability

The factory planning processes will help in achieving the following objectives of the
organization –

• Improvement of overall factory performance so that delivery reliability and customer

service level is improved

• Improvement in procurement planning processes

• Improvement in Finished goods Inventory turns

• Reduction of work in process inventory levels

• Improve Asset Utilization

• Reduce the planning cycle time

FP’s deployment is designed to enhance the overall production and procurement planning
processes to ensure increased reliability of procurement schedules and have better delivery
commitments to the sales team once the field inventory levels are under control

6.1 Factory Planner Terminologies

6.1.1 Planning Horizon

The planning horizon represents the interval of time over which plans are created for the
factory. It will be 3 months for factory planning at Escorts. The buckets will be daily in the
first month and weekly in the next two months.

6.1.2 Demand Orders Categorization

FP will be considering the following types of demands for upstream and downstream
planning –

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Build-To-Stock (BTS) Demand – This demand will be available from the Dispatch Plan
developed in DM. Such demand will be available at Depot-Variant-Week level. This
demand will be further split into BTS forecast demand and BTS safety stock fulfillment
demand. BTS forecast demand will be prioritized over BTS safety stock demand.

Locate-To-Order (LTO) Forecast Demand – This demand will also be available from the
Dispatch Plan developed in DM. Such demand will be available at Plant-Variant-Week

Build-To-Order (BTO) Forecast Demand – This demand will also be available from the
Dispatch Plan developed in DM. Such demand will be available at Plant-Variant-Week
level. Such demand will be used only for procurement planning and not production

Build-To-Order (BTO) Order Demand – This demand will be available from Oracle ERP.
Such demand should be available at Depot-Variant-Date level. This demand will be used for
procurement planning as well as for production planning.

In case of Exports and New Business Line (NBL), release plan from DM will be considered
and planned.

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Fig 10. Demand Incident on Factory and Depots

Demand will be differentiated in FP on the basis of variants, i.e., every variant will have to be
classified as BTO, LTO or BTS. This classification will be done on the basis of the tractor
volumes. This information will have to be maintained by the planner either in ABPP or in

Apart from this, the transportation times from Plant to various Depots will have to be
maintained in ABPP by the planner. It is recommended that such times are at least quarterly

6.1.3 Demand Prioritization

In order to reach the targeted customer service levels, the material planning process should
ensure that the limited supply of components, is allocated to orders such that the overall
amount of lateness is minimized throughout the factory and highest priority orders are
fulfilled first.
Hence, demands from various sources will also have to be prioritized based on the following
considerations –
Region-wise Priority - There will be region-wise priorities defined by the sales team. Such
priorities will have to be respected in FP, in case of capacity and material shortages.

Demand Category Priority - Priorities will be also be defined on the basis of nature of
demand like BTO orders. By default, BTO orders will be prioritized over BTO forecasts,
LTO and BTS demand. Apart from BTO orders, rest of the demand segments like BTO
forecasts, LTO and BTS forecasts will be of similar priority unless some region-wise
priority is specified.

Safety Stock Priority - BTS demand will be split into BTS forecast demand and BTS safety
stock fulfillment demand. BTS forecast demand will be prioritized over BTS safety stock

Due-Date Priority – FP internally prioritizes demand with an earlier due date over the
demand with a later due date.

Demand Prioritization will be specified in Demand_Order_Record native file as defined

above in priority.

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6.1.4 Forecast Netting

Forecast for BTO and LTO variant and actual orders received in the Oracle system will have
to be netted against each other based on Customer-Variant-Month combination. This will
have to be done so that inflated demand is not sent to FP for planning; else this could inflate
the procurements.

To understand this better, let’s consider an example –

In the absence of Forecast Netting, FP will be planning against the inflated demand, as shown
below –

Hence, procurement would be generated for a total demand of 42 tractors, whereas the actual
demand is only for 30 tractors.

Now, if Forecast Netting is used, then FP will be planning the following demand as shown
below –

The total demand input in this case, is still 30 with 12 actual orders and 18 forecasts.

Netting level will be for the complete planning horizon, variant and customer.

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6.1.5 Factory Model

Factory Planner has the capability to build factory model which is a representation of the
actual factory. Following data entities will be required to build a realistic factory model
which also takes into the production and procurement constraints. Items

This data specifies the various parts modeled in the factory model – Bought Out Parts,
Factory Manufactured Parts (FMP), Factory manufactured Assemblies (FMA), Out Side
Processing (OSP) Items and Finished Tractor variants.

There are 3 different plants of Escorts namely EP1, EP2 and EP3. The same part is used in all
the plants, and its procurement is to be handled separately for each and every plant due to
some excise benefits and other commercial issues. So, to differentiate these parts, a
combination of Part and Plant will be modeled as an individual part in FP. The following
table describes the part number defined in Oracle versus the part number considered in FP.

Item Code in Organization Item Code in FP

Oracle Code

D10077380 85 D10077380_85

D10035190 84 D10035190_84

D10005130 174 D10005130_174

Apart from this, there will be 2 parts modeled for every BTO tractor variant. This will be
done by attaching “F” to the variant incase the demand is a BTO forecast demand, and “O” to
the variant in case the demand is a BTO order. Bill of Materials (BOM)

Bills of Materials in FP provide the means of modeling the following requirements –

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Multiple level Bill of Material (BOM) – Using this functionality, multiple level of BOM
can be modeled in FP. In the below example, a tractor is made of engine, backend assembly
and various other BOP. Now, an engine is made of conrod, cylinder block and other BOPs.




Fig 11. BOM structure

BOMs will be read directly from Oracle. The parent name and the component name will be
read in to FP as a combination of the parent or component name with the organization code.
Also, since the material is machined in Plant 1 and then transferred to Plant 2 or Plant 3 for
the final sub-assembly or tractor assembly, there will be cases where the bom can appear
broken in FP (not in Oracle Apps). Hence, such broken boms will be joined in ABPP by
inserting one more record to join the broken bom.

The example below will clarify the situation –

A sub-assembly D10093950 is manufactured in EP1 using D10147530 and is then

transported to EP3 to be used in a sub-assembly D10104750 in EP3.

The BOM in Oracle is as follows -

Parent Code Parent Code Component Component Organization

Organization Code Code

D10104750 EP3 D10093950 EP3

D10093950 EP1 D10147530 EP1

As Item definition in FP is a combination of Item Code and its organization, following BOMs
will be created in FP –

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BOM Code Parent Code Component Code

BOM_1 D10104750_EP3 D10093950_EP3

BOM_2 D10093950_EP1 D10147530_EP1

BOM_1 requires a component ‘D10093950_EP3’ and BOM_2 manufactures

‘D10093950_EP1’. Practically both the BOMs use the same part ‘D10093950’ but for FP
there are 2 separate items namely, ‘D10093950_EP3’ and ‘D10093950_EP1’. Hence, the
BOM appears to be broken in FP since there is no link between BOM_1 and BOM_2.

To avoid such a situation, a dummy BOM will be created in FP which will link both these
BOMs. The dummy BOM in this case will have the parent item as ‘D10093950_EP3’ and the
component name as ‘D10093950_EP1’. The final BOM in FP will now be as follows –

BOM Code Parent Code Component Code

BOM_1 D10104750_EP3 D10093950_EP3

BOM_3 D10093950_EP3 D10093950_EP1

BOM_2 D10093950_EP1 D10147530_EP1

BOM_1 and BOM_2 are now linked via a dummy BOM, BOM_3.

A dummy routing will also be attached to this BOM with the operation time as the
transportation time from source plant to the destination plant. Since, this will be a fixed
transportation time irrespective of the number of the items transported; this time will be
modeled as the cool down time.

Date Effectivity – Using this functionality, a date effective BOM requirement can be
modeled in FP. For example, in the figure below, engine is made using conrod, cylinder
block and a BOP between 1-Jan-2009 and 1-Mar-2009. Post 1-Mar-2009 BOP will be
replaced with BOP_1 in the same BOM. Hence, any new schedules should not be generated
for part BOP after 1-Mar-2009. After 1-Mar-2009, schedules should be generated only for
part BOP_1.



Escort Pvt Ltd,AMG Page 30

1-Jan-2009 1-Mar-2009 1-Dec-2009

Fig 12. BOM with Date Effectivity

The data in Oracle can have multiple ECA’s with different start dates and disable dates. In
such a situation, the ECA falling in the FP plan horizon will be considered and ECAs in the
past will not be considered. Thus, BOM ECA will have to be closely monitored and regularly
maintained in Oracle.

In order to have a better plan stability, it is recommended to reduce the number of BOM EC
changes on a frequent basis. BOM EC changes will have to be monitored as a separate KPI
on a regular basis and root causes will have to be identified and then reduced on an on-going
basis to avoid frequent re-scheduling of BOMs. Routings and Operations

Routings include detailed information of manufacturing of a particular item. The information

includes such items as operations to be performed, sequence of operations, setup and run

It is proposed to model routing at an aggregate level. However, the operations and hence
resources definition in Factory Planner is going to be determined by the tracking points on
the shop floor. These routings will be maintained in ABPP. The aggregate level of the items
will be arrived through the Commodity codes maintained in Oracle. Routings for these
commodity codes will be maintained in ABPP.

The following data will have to be maintained in Oracle -

Item Code Commodity Code

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Apart from the routings maintained in Oracle Apps, there will be certain dummy routings
which will be generated in ABPP for the following cases –

There are certain FMPs that are manufactured in Plant 1, but also directly procured in Plant3
or Plant 2 based on a percentage. Such items will be modeled as Alternate Routings with
proportions. The Alternate Routing of such parts will be generated in ABPP before every FP

There are certain parts that are both OSP items as well as BOP items. The split of the item as
an OSP or BOP item is based on proportions. Such cases will be modeled as Alternate
Routings with proportions. The Alternate Routing of such parts will be generated in ABPP
before every FP run.

In case of BTO forecast demands, dummy routings will be created and assigned to the
corresponding tractor variant. Also, a compressed BOM would be defined which will be used
for generating the procurement schedules.

It is proposed that the commodity codes of various items should be correctly maintained in
Oracle. Also, the routings for these commodity codes should be properly maintained in ABPP
and reviewed every quarterly. Cycle Times

In performing forward and backward propagation, Factory Planner utilizes Operation

Precedence Constraints whenever operations must be run in sequence. Factory Planner breaks
down the time constraining (separating) operations into the following components:

• Pre-op time (setup time)

• Runtime

• Post-op time (Cool-down or wait time)

• Transportation time

The setup times of the machining operations will be defined for critical operations.

Runtimes will be modelled for all the operations of the routings. There are cases where run
time of the operations varies with the item which is being processed at the operations. This
can also be specified as Production Rate for that item.

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Among the above cycle time components, Cool-down time will be considered for heat
treatment operation for gears. Post heat treatment operation, gears have to be cooled for a
certain period of time before being used at the next operation.

As stated earlier, there are 3 plants under Escorts AMG. Machining of engine blocks,
differential housing and gearbox housing is done in the Castings PU of Plant1. After
machining, these components are sent to Plant 3 for assembly. This transportation time will
be modeled in FP via a dummy routing with ‘move’ operations. The transportation time
between various PUs in the same plant will not be modeled in FP.

Since the routings will be maintained at an aggregate level via commodity codes, the
operation run times will also be maintained at that level.

Data for the various operation times will have to be provided in the format defined below –

Commodity Code Operation Name Unit Run Time Setup Time Cool-down Time

Transportation times between the various plants will have to be provided in the format below-

Source Plant Destination Plant Transportation

Time Resources

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The simplest Factory Planner model of a work centre defines the capacity of the work centre
based on its Resource Calendar. The work centre is assumed to be available 24 hours a day, 7
days a week unless specified differently in the Resource Calendar.

At Escorts, resources are mainly of two types, machines and manpower. Resources will be
modelled at an aggregate level and attached to the various operations. This data will be
maintained in ABPP. It is proposed to model only the critical resources in the factory. This
will help in focussed planning and also not constrain the plan output much due to capacity

Following information will have to be maintained in ABPP, so that proper resources are
generated and attached to the correct routing and operation –

Produced Item Commodity Code Capacity

Code Constraints Simultaneous Resources

Simultaneous resources are used to model situations in which more than one resource is
required to complete an operation. The operation cannot be completed unless all resources
are available. This is modelled using the AUX1 component of simultaneous resources

The assembly of certain Heavy-Duty tractor models is to be restricted to 10 tractors per day.
To model this functionality, simultaneous resource will be modelled on the final tractor
assembly process. The capacity of this resource will be constrained through the
corresponding resource calendar to restrict the assembly output to 10 tractors per day.

The capacity of the resources will be defined as per Escorts LTS (Long-Term-Settlement).
Apart from this, normal working shift hours will also have to be specified and regularly
maintained as Resource availability in Resource Calendars mentioned in next segment. Resource Calendars

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Any down time, plant shut downs and holidays of resources over the planning period can be
specified using resource calendars. More than one set of resources can be associated with a
given Calendar if all of them have the same calendar requirements. ABPP UI’s will be
provided to maintain the resource calendars. Manufacturing Lot Sizes and Consolidation Horizon

In case FP is unable to satisfy the demand from inventory (on-hand, wip, in-transit and
pending schedules), then a manufacturing and procurement suggestion is made by FP.

There are certain machining items like cylinder block and cylinder head machining which
require an optimum batch size for production. The batch sizes vary from 100 to even 300 in
case of few cylinder blocks. To model such requirements, manufacturing lot sizes and
consolidation horizon can be used.

Lot sizes can be defined in FP using Minimum Quantity. It is the minimum size of the
manufacturing order that can be produced. But keeping a lot size restriction can result in
generation of earlier procurement schedules (even if there is no demand) and would increase
the inventory handling cost of the Bought Out Parts.

A better approach to handle lot size is through Consolidation Manufacturing Orders (CMO)
in FP. In CMO, a consolidated manufacturing order would be generated based on the
consolidation horizon specified for the part. Demands for the part falling in the same
consolidation horizon would be clubbed together and a single manufacturing order would be
created with the expected due date as the due date of the earliest demand.

CMO is better than lot size, as in CMO procurements would be generated based on actual
demand, whereas in lot size, procurement might be generated without any demand in the near
future. The final decision on selection of the approach would be taken after a detailed data
analysis for such parts. Vendor and Vendor Lead Times

In order to release an accurate procurement schedule in sync with the production plan, the
material availability from the vendor will have to be accurately defined. To enable this,
vendor lead times apart from the vendor capacities will have to be defined. This lead time
will be the transportation lead time between the vendor location and Escorts Plant in

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Faridabad. For a few cases, where the vendor is importing the raw material and then
manufacturing the item required by Escorts, vendor’s manufacturing lead time as well as the
procurement lead time will have to be added to the transportation time and maintained as the
vendor lead time in ABPP. Procurement MOQ and FLM

Procurement lot sizes need to be modeled in FP to accurately capture the procurement

process between Escorts and its vendors. For this the minimum order quantity (MOQ) of the
vendor and his fixed lot multiples (FLM) will be modeled in FP for procurement planning.
MOQ is the quantity below which the vendor will not be able to supply. FLM is the multiple
quantity which the vendor is able to supply.

An illustration of the concept is explained below –

D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 D11

Procurements 0 0 20 60 0 45 0 100 45 0 80

MOQ 40

FLM 25

Lot Sized
0 0 40 40 0 50 0 100 40 0 100

Lot sized procurements on day D3 will be 40 based on MOQ. Now, the excess procurements
of (40-20=20) will be considered next day D4. So, demand for D4 will now be 60-20=40.

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Hence, lot sized procurement on D4 will be also be 40. D6 procurement need is 45 which is
greater than MOQ, hence it will be in multiples of FLM which is 50.

By default, the demand will be clubbed for 1 week by FP for applying the lot sizes. This
might result in excess procurements in case of demand fluctuations. Hence, the procurement
time will be specified as 1 Day in supplier_part_record for all the parts to minimize the
overall procurement.

A differentiated strategy will have to be adopted for stranger and runner models and
parts.MOQ and FLM will be defined only for regular and runner parts. Vendor Share of Business

Escorts has an agreed Share of Business with its vendors. This functionality can be modeled
using FP’s Vendor Fair-Share functionality where the suggested procurements from the
various vendors will be as per the percentages defined in SOB. SOB values will be fetched
directly from Oracle Apps in every run.

Let’s take an illustration of the concept –

There is an Item D1001010, supplied by Vendor-1 and Vendor-2. The total demand for
D1001010 is 200 in Week1. The suggested procurements from FP in week 1 will be as
follows -

Vendor (in Procurement

Vendor-1 30 60

Vendor-2 70 140

A report of SOB adherence to the planned SOB will be provided to the planners that will aid
them in re-defining and negotiating the future SOB based on actual vendor deliveries.

The SOB percentages will be specified in supplier_part_record native file.

Escort Pvt Ltd,AMG Page 37 Procurement Consolidation Horizon

In case of stranger parts, it is recommended to have a procurement consolidation policy

defined based on a consolidation interval. FP consolidates the procurements into a single
procurement as long as the PO release dates are in the same consolidation interval.

D1 D2 D3 D4 D5 D6 D7 D8 D9 D10 D11

Procurements 0 0 20 60 0 45 0 100 45 0 80


0 0 125 0 0 0 0 225 0 0 0
Procurements Just-In-Time Procurements

Since large inventories can reduce the margins and block the working capital, it is necessary
absolutely critical that the demand is met with just-in-time procurements as far as possible.
FP suggests the material procurements based on a server flag jit_part_reservations which
helps in just-in-time procurements. Safety Stock Profiles

A safety stock of BOP (purchased parts) and few sub-assemblies will be maintained on-hand
to deal with unexpected variations in demand and supply. Safety stock maintenance should be
based on the following parameters –

• Part cost and criticality

• Demand volatility

• Vendor’s ability to respond to demand volatility

• Past history

FP has the ability to define both time-based and quantity-based safety stock. It is

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recommended to have a differentiated strategy for stranger, runner and repeater parts. Time-
based safety stock (defined as Days of Cover) will be defined for runner parts; whereas
quantity based safety stock will be used for stranger parts.

If the Safety Stock is specified in Days of Cover, then FP internally calculates the safety
stock demand based on the actual demand. This safety stock demand is then planned as a
normal demand order. Such orders can be easily differentiated from normal orders as such
order ids carry a prefix of ‘FP-Safety-Stock’ in their order ids.

The following example explains the concept of Safety stock maintained as ‘Days of Cover’.

A safety stock calendar needs to be linked to each purchased or manufactured part for which
a safety stock is to be maintained. The intervals of this calendar represent the safety stock
intervals with the safety stock quantity being specified as a value applicable for each interval.

The safety stock calendar applicable for the part is specified in ItemGroupCalendar while the
calendar details are specified in CalendarDetail, CalendarBasedAttributes and
CalendarPatternDetail. Pattern names ‘EVERYDAY’ will be used in the specification of
safety stock periods. All these entities map to the Named_Calendar_Record in native FP. The
field level mapping is described in the FP Integration document.

6.1.6 Supply Picture

The supply picture information will be fetched directly from Oracle Apps. Hence, to generate
a feasible material and capacity plan supply picture has to be accurately maintained in Oracle
Apps, and Back-flushing is carried out as soon as the part is produced on the assembly line or
machining line. On-Hand Inventory

On hand inventory is inventory of finished goods, raw material or sub-assemblies (if any) that
is available as supply. Any inventory that is quarantined or rejected or not available for
production will not be included in FP.

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Following types of materials will be considered for On Hand inventory –

Finished Tractor Inventory – This inventory will include finished tractor ‘OK’ inventory in
the Plant (EP3 and EP2, if any). Tractor inventory in Quality operation will also be
considered as Tractor inventory.

Raw Material Inventory – Raw material inventory inside all the plants (EP1, EP2, EP3, ES3
and CHD) will be considered to generate a feasible material and capacity plan. Any rejected
or scrap raw material inventory will not be considered for planning. Such inventory should be
moved to RTV site in Oracle which will not be read into FP. Work In Process (WIP)

Work in process is typically associated with manufacturing job orders. This is represented in
FP as work in process. This information is available from the job orders in Oracle Apps. WIP
will be read in FP in unassigned_wip_record and read at the last operation of the routing. Pending Schedules

Pending schedules are material that have been ordered from the suppliers and have a
proposed date of arrival (need-by date) in the plant. Open schedules with the arrival time in
the past (earlier than the plan start date) will not be considered in FP for planning. Such
schedules will be assumed to be closed in Oracle Apps. Only schedules with the need-by date
in future from the plan start date will be considered for planning in FP. In-transit Plant Material

Following types of in-transit inventory will be considered in FP for planning -

In-transit tractor FG inventory already dispatched from plant to a particular depot will be
considered in FP for planning. The demand that can be fulfilled using this demand will be
satisfied first from this in-transit inventory. Such inventory will be read in with the dispatch
date from the plant and the transportation time to the desired depot will be added to this to
arrive at the tentative arrival date at the depot.

In-transit material from EP1, EP2, EP3, CHD and SP3 will be considered with the dispatch
date from source location and the respective transportation time will be added to this date to

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arrive at the tentative arrival date at the plant. In-transit Vendor Material

The in-transit vendor material will also be considered for planning in FP. This in-transit raw
material inventory will be netted off from the pending schedules and the remaining pending
schedules along with the in-transit material will be considered for planning by FP. This
material will be netted off against the demand and then fresh procurements will be suggested.

A UI will be developed in ABPP for the suppliers to capture the following –

• Item

• Shipped Date

• Shipped Quantity

Once the data is captured, following workflow will be executed –

Based on the shipped date and the expected supplier transit lead time, an expected arrival date
for the shipment will be calculated.

In case there is a pending schedule against this shipment, then this shipment will not be
considered to avoid duplicity of the schedules.

In case the schedule for this shipment has expired, then a schedule will be created in FP and
Oracle based on the expected arrival date.

Apart from this, no fresh communication will be sent to Suppliers for this schedule. This
development will have to done in Oracle Apps as supplier communication for the schedules is
handled in Oracle Apps.

This is a temporary solution which is being proposed so that accurate procurement schedules
are generated. Once the process of supplier collaboration is developed in Oracle, this
workflow should be terminated and a new workflow will have to be developed to capture in-
transit inventory from Oracle.

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6.1.7 Critical Business Requirements Sub-Contracted Parts (OSP)

There are certain parts where the child parts/ components are procured from certain vendors
and then these items are sent to other vendors (termed as Out Side Processors) for finishing.
Once the finished material is ready, it is sent by the supplier and received inside the plant.
Such items are termed as OSP items in Escorts. For such items, procurements should be
generated for the component parts as well as an indication should be sent to Out Side
Processors regarding the availability of the finished part in the plant.

In FP, such items will be modeled as Sub-contracted parts. These items will be modeled in
part_number_record by setting subcontracted_p as 1. FP generates procurements for both the
finished part as well as for the component items. Same Part as OSP and BOP

There are certain parts which can be directly procured from certain suppliers or can be sub-
contracted (OSP) to a supplier with the basic OSP components. Procurement schedules
should be generated for the Bought-Out Part and OSP component items based on a Share of
Business (SOB) pre-defined percentage.

This requirement will be modeled using alternate routings. A dummy routing and a dummy
item will be created for all such items and attached as an alternate routing for the item.
Routing usage percentages will be defined based on the SOB.

The information about the same part being defined as an OSP and BOP, will have to be
maintained by planners in an ABPP table ‘MST_UDSOB_ITEMS’ through a separate UI.
The SOB percentages will also be maintained in ABPP.

To illustrate this design, let’s consider an item ‘D10006690_85’ which is an OSP item as well
as a Bought-Out Part (BOP). This item will be maintained in the table
‘MST_UDSOB_ITEMS’ with the fields BOP and OSP set as ‘Y’ –

The SOB for the item will also be maintained in the same table. The SOB for the item as

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BOP is 30% and as an OSP is 70% in this case.

Once this data is maintained in the table, then following will be done automatically –

• A dummy part ‘D10006690_85#BOP’ will be created in Item master table.

• An additional routing will be created for the part ‘D10006690_85’ in Item Bom
Routing table with the routing and bom name as ‘D10006690_85#BOP’.

• A new bom will be created in bom components table with the component as

• SOB percentages will be defined as Routing usage percentage in Item bom routing

• Approved Supplier item table will be updated with the new item
‘D10006690_85#BOP’ where the original item was ‘D10006690_85’. Same Part as FMP and BOP

There are certain parts which are manufactured in the plant as FMP and also directly
procured from the supplier. This process will also follow the same path as described above.
In place of OSP field to be maintained in the table ‘MST_UDSOB_ITEMS’, FMP and BOP
fields will be maintained. The SOB percentages will be defined in SOB_BOP and SOB_FMP
fields. Rest of the process remains same as defined in Same Part as FMP and OSP

There are certain parts which are manufactured in the plant as FMP and also sub-contracted
to outside suppliers. FMP and OSP fields will be maintained in the table
‘MST_UDSOB_ITEMS’. The SOB percentages will be defined in SOB_OSP and SOB_FMP

This requirement will be modeled using alternate routings. A dummy routing and a dummy
item will be created for all such items and attached as an alternate routing for the item.
Routing usage percentages will be defined based on the SOB.

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To illustrate this design, let’s consider an item ‘D10006690_85’ which is an OSP item as well
as a FMP. The BOM for this item is made of 2 parts ‘D10006691_85’ and ‘D10006692_85’.

Once this data is maintained in the table, then following will be done automatically –

• Dummy parts ‘D10006691_85#OSP’ and ‘D10006692_85#OSP’ will be created in

Itemmaster table.

• An additional routing will be created for the part ‘D10006690_85’ in

ItemBomRouting table with the routing and bom name as ‘D10006690_85#OSP’.

• A new bom will be created in bomcomponents table with the components as

‘D10006691_85#OSP’ and ‘D10006692_85#OSP’.

• SOB percentages will be defined as Routing usage percentage in Itembomrouting


• Approved Supplier item table will be inserted with the new items
‘D10006691_85#OSP’ with the same information as original item was
‘D10006691_85’. Same will be done for the other component ‘D10006692_85#OSP’. Phantom Parts

Phantoms parts are defined in the BOM to make it more modular. There are no procurements
for these parts and there is no inventory maintained against such parts.

FP also has the ability to define phantom parts do not have any procurements or any
manufacturing orders against them.

This functionality is modeled by defining consumed parts as phantom in

bom_components_record. The server flag ‘define_phantoms_in_bom’ will have to be set to
TRUE for this functionality to work.

6.2 Detailed Solution Design – Planning Process

The following section defines the factory planning process as done by the Factory Planner.
Factory Planner internally prioritizes the demand orders, then assigns the available inventory

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in the plant and balances the critical resources to arrive at the most feasible procurement and
production plan for the next 3 months.

6.2.1 Prioritize Demands

FP internally sorts all the demand orders as per the priority assigned to the demand and its
due date. Demand with an earlier due date is internally prioritized by FP over demand with a
later due date. The demand priority will be specified as mentioned in Demand Prioritization
Policy section above. If there is a competition among some demand orders, FP automatically
allocates the capacity to the demand with an earlier due date. In case of demand orders with
same due date, order priority (if specified) will act as a tie-breaker.

Also, demands with large quantities will be broken down into various small quantity
demands. This will be done as FP internally tries to satisfy a complete demand order quantity
and in case of capacity or material constraints, small quantity demand orders would be
preferred over large quantity demand order. This is done so that overall demand satisfaction
is higher.

Consider the following demand orders –

Demand Order Due Date Demand Quantity Priority

Demand_1 01-Mar 15 0

Demand_2 01-Mar 10 0

Demand_3 27-Feb 5 0

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Demand_4 01-Mar 20 100

Demands will be sorted by FP for material allocation in this fashion –

Demand Order Due Date Demand Quantity Priority

Demand_3 27-Feb 5 0

Demand_4 01-Mar 20 100

Demand_2 01-Mar 10 0

Demand_1 01-Mar 15 0

Hence, the demand orders are prioritized by FP as per the due date, then priority and then
quantity. This sorting priority can be controlled through a server flag:

6.2.2 Net off Depot Transportation Time

The demand due dates will be the dates when the tractor will be assumed to be arrived at the
Depot. For example, if the due date of a particular demand from Ahmedabad depot is 25th
Mar 2009, then the tractor will have to reach Ahmedabad depot latest by 25th Mar 2009.

In order to arrive at the production plan for this tractor, the transportation time from
Faridabad plant to Ahmedabad depot will be netted off from the due date of the demand. The
netting off the depot transportation time will be done by FP.

6.2.3 Inventory Assignment

Once the demand orders are sorted as per the priority logic, all parts are sorted beginning
with FG, assemblies, sub-assemblies and ending with raw material inventory.

For each part, FP identifies demands and the available supplies. All the supplies defined in
section 5.3.6 will be used for supply search.

In case of insufficient inventory or wip, the component parts are identified (through BOM
explosion) and if needed, new supply sources (manufacturing orders and procurement orders)

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are created. Then this supply is assigned to insufficient demands based on production due
date (actual due date minus depot transportation time).

A re-assignment of supplies to demands is done at the end to –

• Eliminate or reduce the late or short orders.

• Remove cross-feeds, if any . Cross-feed is a situation where a demand with a later due
date is fed with an earlier supply and vice-versa. Reducing cross-feeds will help in
pegging a demand to the latest available supply.

Removing cross-feeds is also controllable through a server flag : ia_post_processing

6.2.4 Capacity Balancing

Once the inventory assignment phase is completed, FP balances all the over-loaded resources
to arrive at the most balanced production and procurement plan. To achieve capacity
requirements planning, FP uses a pull-push based approach to obtain a feasible capacity plan.
This approach balances resource workload in every time bucket by either pulling or pushing
tasks at that resource to match the workload in a time bucket to the capacity available in that
time bucket.

During the capacity balancing phase, due dates and priorities of the demand orders are
respected. If a demand with an earlier due date cannot be produced at a resource which is
already overloaded with other tasks in that time bucket, such demand order is pulled in earlier
time buckets of that resource. In case the earlier time buckets are also fully utilized, the
demand is then pushed to a later time bucket where the resource capacity is available.

In case the demand is either pulled or pushed depending on the capacity availability at that
resource, the suggested procurement schedules are also pulled or pushed to align the
procurements with the production requirements.

The following example shows how the demand will be pulled and pushed to respect the
capacity constraint. The green arrows represent the pulling in of demand while red arrows
represent delaying of demand.

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Model D1 D2 D3 D4 D5 D6 D7
No Of Shifts 1 1 1 2 1 1 1
Per Shift Thru Put 90 90 90 90 90 90 90
Capacity 90 90 90 180 90 90 90
Heavy Duty Thruput 10 10 10 10 10 10 10
Heavy Duty Capacity 10 10 10 20 10 10 10
FT-45 30 70 0 10 30 60 10
Demand FT-60 30 50 40 0 80 30 50
FT-70 0 10 0 40 0 25 0

FT-45 50 30 20 10 30 60 10
Fulfillment FT-60 30 50 40 40 50 20 50
FT-70 10 10 10 20 10 10 5
The capacity balancing horizon will be set to 30 days. Only overloaded resources and their
tasks falling in this period will be considered for balancing.

6.2.5 Schedule Release

Following is the time phased output that will be given to the suppliers of the procurement
schedule. The red “FIRM INPUT” is decided for a period of 5 days for which there would be
no new procurement requests generated and old procurements will be taken back as firm
supply. The green area denotes the time

W1 W2 W3 W4 W5 W6 W7 W8


Till M+3


period for which new procurements can be generated
Fig 13. Schedule Release and these will be output as firm
schedules to the suppliers. The grey area is the tentative plan.The plan generated after the
capacity balancing phase will be then used to send procurement schedules to the respective
vendors. Every schedule will have the following details –

• Item Code – Item to be procured.

• Item Version - At the time of schedule releases in Oracle Apps, the current active
version of the procured item will be fetched and sent along with the schedule details.

• Vendor – vendor code who will be supplying this material.

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• Quantity – quantity required at the shop floor based on the demand

• Need-by Date – The date when this material in the desired quantity needs to be made
available in the plant for production.

• Schedule Release Date – This is the date when the schedule is to be released in Oracle
Apps, so that the required material in the desired quantity is available in the plant.
This date is calculated as Need-by date minus the vendor lead time. Following table
explains this date calculation with examples –

Vendor Schedule
Schedule ID Item Code Vendor Code Need-by Date
Lead Time Release Date

SCHD-1 D1001010 Vendor 1 15-Mar 10 05-Mar

SCHD-2 D1001010 Vendor 2 07-Mar 3 04-Mar

SCHD-3 D1002010 Vendor 1 21-Mar 10 11-Mar

SCHD-4 D1002010 Vendor 2 24-Mar 3 21-Mar

• Disable Date – The date after which this material cannot be received in the plant. This
date is not calculated by FP. This date will be calculated in the interface between FP
and Oracle Apps based on item tolerance maintained in item master in Oracle Apps.

Once the FP plan is finalized, all the schedules with the ‘Schedule Release Dates’ falling in
the next 2 weeks will be released as firm schedules in Oracle Apps automatically with the
Need-by date as recommended by FP. In the above example, if FP has run on 01-Mar (i.e,
Plan start date is 01-Mar), then following schedules will be released in Oracle Apps – SCHD-
1, SCHD-2 and SCHD-3. Since the Schedule release date of SCHD-4 is not within 2 weeks
from FP plan start date, this schedule will not be released in Oracle. However, this schedule
SCHD-4 will be sent to the vendors as a tentative schedule.

6.2.6 Buffer Quantities for ‘C’ Class Items

In case of C-class items and hardware items, a buffer quantity of around 1% percent will have
to be added to take care of rejections and damages. This addition of quantity will be done in
integration between FP and Oracle Apps. For this functionality, item classification will have

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to be correctly defined and maintained in either Oracle item master or in ABPP

7. Findings

Sr Description Customer Of Purpose

No Report

A Validation Reports

Items revision Report

Items with No ASL/Broken For proactive correction of data

BOM errors to reduce FP run time

SOB not equal to 100%

Std PO/ No PO

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B Plan reports

Procurement Plan Buyer To see schedule item wise

Production Plan Planner To get day wise Production Plan

Daily Buyer Report Buyer Buyer wise Date wise Schedules

Production Plan Commitments Planner To update Production Plan

Detail Safety Report Planner To get Safety stock data

C KPI reports

Schedule Adherence Report Schedule Adherence-Supply

Supply Heads
level-item level

Detail Inventory Reports Supply Heads Inventory status and analysis

and Planning

8. Bibliography

1. Factory Planner Features and Terminologies From i2 Team.

2. Agriculture Equipment – Market and Analysis by Indian Brand Equity Foundation

3. www.escortsgroup.org

4. www.indiaitaly.com

5. www.zinnov.com

6. www.ibef.org

7. www.google.com

8. www.krchoksey.com

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