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PRODUCTION & OPERATIONS MANAGEMENT

UNIT –1

Introduction:

The very essence of any business is to cater needs of customer by providing services and
goods, and in process create value for customers and solve their problems. Production and
operations management talks about applying business organization and management concepts
in creation of goods and services.

Production
Production is a scientific process which involves transformation of raw material (input) into
desired product or service (output) by adding economic value. Production can broadly
categorize into following based on technique:

Production through separation: It involves desired output is achieved through separation or

extraction from raw materials. A classic example of separation or extraction is Oil into various
fuel products.

Production by modification or improvement: It involves change in chemical and mechanical

parameters of the raw material without altering physical attributes of the raw material.
Annealing process (heating at high temperatures and then cooling), is example of production by
modification or improvement.

Production by assembly: Car production and computer are example of production by assembly.

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Importance of Production Function and Production Management
Successful organizations have well defined and efficient line function and support function.
Production comes under the category of line function which directly affects customer
experience and there by future of organization itself.

Aim of production function is to add value to product or service which will create a strong and
long lasting customer relationship or association. And this can be achieved by healthy and
productive association between Marketing and Production people. Marketing function people
are frontline representative of the company and provide insights to real product needs of
customers.

An effective planning and control on production parameters to achieve or create value for
customers is called production management.

Operations Management
As to deliver value for customers in products and services, it is essential for the company to do
the following:

Identify the customer needs and convert that into a specific product or service (numbers of
products required for specific period of time)
Based on product requirement do back-ward working to identify raw material requirements
Engage internal and external vendors to create supply chain for raw material and finished
goods between vendor → production facility → customers.

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 Operations management captures above identified 3 points.

Production Management v/s Operations Management

A high level comparison which distinct production and operations management can be done on
following characteristics:

Output: Production management deals with manufacturing of products like (computer, car, etc)
while operations management cover both products and services.
Usage of Output: Products like computer/car are utilized over a period of time whereas
services need to be consumed immediately
Classification of work: To produce products like computer/car more of capital equipment and
less labour are required while services require more labour and lesser capital equipment.
Customer Contact: There is no participation of customer during production whereas for
services a constant contact with customer is required.
Production management and operations management both are very essential in meeting
objective of an organization.

Nature and Scope of Production and Operations Management

Production and operations management concern with the conversion of inputs into outputs,
using physical resources, so as to provide the desired utilities to the customer while meeting
the other organizational objectives of effectiveness, efficiency and adoptability. It distinguishes
itself from other functions such as personnel, marketing, finance, etc., by its primary concern
for ‘conversion by using physical resources.’ Following are the activities which are listed under
production and operations management functions:

1. Location of facilities
2. Plant layouts and material handling
3. Product design

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4. Process design
5. Production and planning control
6. Quality control
7. Materials management
8. Maintenance management.

1. LOCATION OF FACILITIES
Location of facilities for operations is a long-term capacity decision which involves a long
term commitment about the geographically static factors that affect a business organization. It
is an important strategic level decision-making for an organization. It deals with the questions
such as ‘where our main operations should be based?’
The selection of location is a key-decision as large investment is made in building plant and
machinery. An improper location of plant may lead to waste of all the investments made in
plant and machinery equipments. Hence, location of plant should be based on the company’s
expansion plan and policy, diversification plan for the products, changing sources of raw
materials and many other factors. The purpose of the location study is to find the optimal
location that will results in the greatest advantage to the organization.

2. PLANT LAYOUT AND MATERIAL HANDLING

Plant layout refers to the physical arrangement of facilities. It is the configuration of
departments, work centers and equipment in the conversion process. The overall objective of
the plant layout is to design a physical arrangement that meets the required output quality and
quantity most economically.
According to James Moore, “Plant layout is a plan of an optimum arrangement of facilities
including personnel, operating equipment, storage space, material handling equipments and all
other supporting services along with the design of best structure to contain all these facilities”.

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‘Material Handling’ refers to the ‘moving of materials from the store room to the machine and
from one machine to the next during the process of manufacture’. It is also defined as the ‘art
and science of moving, packing and storing of products in any form’. It is a specialized activity
for a modern manufacturing concern, with 50 to 75% of the cost of production. This cost can be
reduced by proper section, operation and maintenance of material handling devices. Material
handling devices increases the output, improves quality, speeds up the deliveries and decreases
the cost of production. Hence, material handling is a prime consideration in the designing new
plant and several existing plants.

2. PRODUCTDESIGN
Product design deals with conversion of ideas into reality. Every business organization has
to design, develop and introduce new products as a survival and growth strategy.
Developing the new products and launching them in the market is the biggest challenge
faced by the organizations.
The entire process of need identification to physical manufactures of product involves three
functions: marketing, product development, and manufacturing. Product development
translates the needs of customers given by marketing into technical specifications and
designing the various features into the product to these specifications. Manufacturing has the
responsibility of selecting the processes by which the product can be manufactured. Product
design and development provides link between marketing, customer needs and expectations
and the activities required to manufacture the product.

4. PROCESS DESIGN
Process design is a macroscopic decision-making of an overall process route for converting the
raw material into finished goods. These decisions encompass the selection of a process, choice
of technology, process flow analysis and layout of the facilities. Hence, the important decisions
in process design are to analyze the workflow for converting raw material into finished product
and to select the workstation for each included in the workflow.

Scope of Production Planning and Control

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5.PRODUCTIONPLANNINGANDCONTROL
Production planning and control can be defined as the process of planning the production in
advance, setting the exact route of each item, fixing the starting and finishing dates for each
item, to give production orders to shops and to follow up the progress of products according to
orders.
The principle of production planning and control lies in the statement ‘First Plan Your Work and
then Work on Your Plan’. Main functions of production planning and control includes planning,
routing, scheduling, dispatching and follow-up.

Planning is deciding in advance what to do, how to do it, when to do it and who is to do it.
Planning bridges the gap from where we are, to where we want to go. It makes it possible for
things to occur which would not otherwise happen.
Routing may be defined as the selection of path which each part of the product will follow,
which being transformed from raw material to finished products. Routing determines the most
advantageous path to be followed from department to department and machine to machine till
raw material gets its final shape.
Scheduling determines the program for the operations. Scheduling may be defined as ‘the
fixation of time and date for each operation’ as well as it determines the sequence of
operations to be followed.

Scope and Objectives of Production Management

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 Scope of production and operations management

Dispatchingis concerned with the starting the processes. It gives necessary authority so as to
start a particular work, which has already been planned under ‘Routing’ and ‘Scheduling’.
Therefore, dispatching is ‘release of orders and instruction for the starting of production for any
item in acceptance with the route sheet and schedule charts’.
The function of follow-up is to report daily the progress of work in each shop in a prescribed
proforma and to investigate the causes of deviations from the planned performance.

6.QUALITYCONTROL

Quality Control (QC) may be defined as ‘a system that is used to maintain a desired level of
quality in a product or service’. It is a systematic control of various factors that affect the quality
of the product. Quality control aims at prevention of defects at the source, relies on effective
feed back system and corrective action procedure.

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 Quality control can also be defined as ‘that industrial management technique by means of
which product of uniform acceptable quality is manufactured’. It is the entire collection of
activities which ensures that the operation will produce the optimum quality products at
minimum cost.

The main objectives of quality control are:

 To improve the companies income by making the production more acceptable to the
customers i.e., by providing long life, greater usefulness, maintainability, etc.
 To reduce companies cost through reduction of losses due to defects.
 To achieve interchangeability of manufacture in large scale production.
 To produce optimal quality at reduced price.
 To ensure satisfaction of customers with productions or services or high quality level, to build
customer goodwill, confidence and reputation of manufacturer.
 To make inspection prompt to ensure quality control.
 To check the variation during manufacturing.
7.MATERIALSMANAGEMENT
Materials management is that aspect of management function which is primarily concerned
with the acquisition, control and use of materials needed and flow of goods and services
connected with the production process having some predetermined objectives in view.
The main objectives of materials management are:

 To minimize material cost.

 To purchase, receive, transport and store materials efficiently and to reduce the related cost.
 To cut down costs through simplification, standardization, value analysis, import substitution,
etc.
 To trace new sources of supply and to develop cordial relations with them in order to ensure
continuous supply at reasonable rates.
 To reduce investment tied in the inventories for use in other productive purposes and to
develop high inventory turnover ratios.

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 8. MAINTENANCE MANAGEMENT
In modern industry, equipment and machinery are a very important part of the total productive
effort. Therefore, their idleness or downtime becomes are very expensive. Hence, it is very
important that the plant machinery should be properly maintained.
The main objectives of maintenance management are:

1. To achieve minimum breakdown and to keep the plant in good working condition at the
lowest possible cost.
2. To keep the machines and other facilities in such a condition that permits them to be used at
their optimal capacity without interruption.
3. To ensure the availability of the machines, buildings and services required by other sections
of the factory for the performance of their functions at optimal return on investment.

Historical Evolution:
For over two centuries, operations and production management has been recognized as an
important factor in a country’s economic growth. The traditional view of manufacturing
management began in eighteenth century when Adam Smithrecognized the economic benefits
of specialization of labor. He recommended breaking of jobs down into subtasks and recognizes
workers to specialized tasks in which they would become highly skilled and efficient. In the
early twentieth century, F.W. Taylor implemented Smith’s theories and developed scientific
management. From then till 1930, many techniques were developed prevailing the traditional
view. Brief information about the contributions to manufacturing management is shown in the
following table.

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Historical summary of operations management

Production managementbecomes the acceptable term from 1930s to 1950s. As F.W. Taylor’s
works become more widely known, managers developed techniques that focused on economic
efficiency in manufacturing. Workers were studied in great detail to eliminate wasteful efforts
and achieve greater efficiency. At the same time, psychologists, socialists and other social
scientists began to study people and human behavior in the working environment. In addition,
economists, mathematicians, and computer socialists contributed newer, more sophisticated
analytical approaches.
With the 1970s emerge two distinct changes in our views. The most obvious of these, reflected
in the new name operations managementwas a shift in the service and manufacturing sectors

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of the economy. As service sector became more prominent, the change from ‘production’ to
‘operations’ emphasized the broadening of our field to service organizations. The second, more
suitable change was the beginning of an emphasis on synthesis, rather than just analysis, in
management practices.

Role & responsibilities of the production manager:

Some of the major responsibilities of a production manager are: (1) Production planning (2)
Production control (3) Quality control (4) Method analysis (5) Inventory control (6) Plant layout
(7) Work measurement and (8) Other functions:

(1) Production planning:

Production planning is the first function performed by the production manager.

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Production planning is concerned with thinking in advance what is to be produced, how it is to

be produced and by what time should it be produced. It is concerned with deciding about the
production targets to be achieved by keeping in view the sales forecasts.

(2) Production control:

Production planning cannot be properly achieved without an effective system of production
control. It is in fact concerned with successful implementation of production planning. It aims at
completing production well in time and also with lesser costs. A proper system of production
control ensures continuous production, lesser work-in-progress and minimisation of wastages.

(3) Quality control:

The production manager is also concerned with maintaining required quality of the product.
Quality control is concerned with controlling the negative variables which affect the ultimate
quality of a product. It is concerned with use of all the ways and means where by quality
standards could be maintained.

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(4) Method analysis:
There are many alternative methods for manufacturing a product. Some methods are more
economical than others. The production manager should study all the methods in detail by
analysing them in detail and select the best alternative out of them. The process of selecting
the best alternative is known as methods of analysis.

ADVERTISEMENTS:

Methods of analysis are considerably helpful in minimising the cost of production and
improving productivity of the concern.

(5) Inventory control:

The next important function to be carried by a production manager is to exercise proper control
over the inventory. He should determine economic order size, maximum, minimum, average
and danger levels of materials so that problems of overstocking and understocking do not arise.
This also helps in minimising wastages of materials.

(6) Plant layout:

Plant layout is primarily concerned with the internal set up of an enterprise in a proper manner.
It is related to orderly and proper arrangement and use of available resources viz., men, money,
machines, materials and methods of production inside the factory. In other words it is
concerned with maximum and effective utilisation of available resources at minimum operating
costs.

(7) Work measurement:

Work measurement methods are concerned with measuring the level of performance of work
by a worker. Time and motion studies techniques can be used for work measurement. If a
worker works below the level fixed by work-measurement techniques, his performance must
be improved through positive or negative incentives.

(8) Other functions:

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Apart from the above-mentioned functions, the production Department also carries certain
other functions viz., cost control, standardisation and storage, price analysis and provision of
wage incentives to workers etc.

Types of Manufacturing Processes and Product Design:

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 UNIT—2

Production Planning and Control

Production planning and control is a tool available to the management to achieve the
stated objectives. Thus, a production system is encompassed by the four factors. i.e., quantity,
quality, cost and time. Production planning starts with the analysis of the given data, i.e.,
demand for products, delivery schedule etc., and on the basis of the information available, a
scheme of utilization of firms resources like machines, materials and men are worked out to
obtain the target in the most economical way.
Once the plan is prepared, then execution of plan is performed in line with the details given in
the plan. Production control comes into action if there is any deviation between the actual and
planned. The corrective action is taken so as to achieve the targets set as per plan by using
control techniques.

Thus production planning and control can be defined as the “direction and coordination of
firms’ resources towards attaining the prefixed goals.” Production planning and control helps to
achieve uninterrupted flow of materials through production line by making available the
materials at right time and required quantity.

NEED FOR PRODUCTION PLANNING AND CONTROL PRODUCTION

The present techno-economic scenario of India emphasize on competitiveness in

manufacturing. Indian industries have to streamline the production activities and attain the
maximum utilization of firms’ resources to enhance the productivity. Production planning and
control serves as a useful tool to coordinate the activities of the production system by proper
planning and control system. Production system can be compared to the nervous system with
PPC as a brain.

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 Production planning and control is needed to achieve:
1. Effective utilization of firms’ resources.
2. To achieve the production objectives with respect to quality, quantity, cost and timeliness of
delivery.
3. To obtain the uninterrupted production flow in order to meet customers varied demand
with respect to quality and committed delivery schedule.
4. To help the company to supply good quality products to the customer on the continuous
basis at competitive rates.

Need of Production Planning and Control

Production planning is a pre-production activity. It is the pre-determination of manufacturing

requirements such as manpower, materials, machines and manufacturing process. Ray wild
defines “Production planning is the determination, acquisition and arrangement of all facilities
necessary for future production of products.”
It represents the design of production system. Apart from planning the resources, it is going to
organize the production. Based on the estimated demand for company’s products, it is going to
establish the production programme to meet the targets set using the various resources.

Production Control
Inspite of planning to the minute details, most of the time it is not possible to achieve
production 100 per cent as per the plan. There may be innumerable factors which affect the
production system and because of which there is a deviation from the actual plan. Some of the
factors that affect are:
1. Non-availability of materials (due to shortage, etc.);
2. Plant, equipment and machine breakdown;
3. Changes in demand and rush orders;
4. Absenteeism of workers; and
5. Lack of coordination and communication between various functional areas of business.

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 Thus, if there is a deviation between actual production and planned production, the control
function comes into action. Production control through control mechanism tries to take
corrective action to match the planned and actual production. Thus, production control reviews
the progress of the work, and takes corrective steps in order to ensure that programmed
production takes place. The essential steps in control activity are:

1. Initiating the production,

2. Progressing, and
3. Corrective action based upon the feedback and reporting back to the production planning.

OBJECTIVES OF PRODUCTION PLANNING AND CONTROL PRODUCTION

Production Planning and Control functions and Objectives

Following are the objectives of production planning and control functions:

1. Systematic planning of production activities to achieve the highest efficiency in production

of goods/services.
2. To organize the production facilities like machines, men, etc., to achieve stated production
objectives with respect to quantity and quality time and cost.
3. Optimum scheduling of resources.
4. Coordinate with other departments relating to production to achieve regular balanced and
uninterrupted production flow.
5. To conform to delivery commitments.
6. Materials planning and control.
7. To be able to make adjustments due to changes in demand and rush orders.

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 Stages in PPC:
Stages of Production Planning and Control
The stages of Production planning and control has three phases namely:

A. Planning Phase
B. Action Phase
C. Control Phase

Phases of production planning and control

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 Planning Phase

Planning is an exercise of intelligent anticipation in order to establish how an objective can be

achieved or a need fulfilled in circumstances, which are invariably restrictive. Production
planning determines the optimal schedule and sequence of operations economic batch
quantity, machine assignment and dispatching priorities for sequencing. It has two categories of
planning namely
1. Prior planning
2. Active planning.
1. PRIOR PLANNING
Prior planning means pre-production planning. This includes all the planning efforts, which are
taking place prior to the active planning.
Modules of pre-planning
The modules of prior planning are as follows:
1. Product development and design is the process of developing a new product with all the
features, which are essential for effective use in the field, and designing it accordingly. At the
design stage, one has to take several aspects of design like, design for selling, design for
manufacturing and design for usage.
2. Forecasting is an estimate of demand, which will happen in future. Since, it is only an
estimate based on the past demand, proper care must be taken while estimating it. Given
the sales forecast, the factory capacity, the aggregate inventory levels and size of the work
force, the manager must decide at what rate of production to operate the plant over an
intermediate planning horizon.
3. Aggregate planning aims to find out a product wise planning over the intermediate
planning horizon.
4. Material requirement planning is a technique for determining the quantity and timing for
the acquisition of dependent items needed to satisfy the master production schedule.
2. ACTIVE PLANNING

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 The modules of active planning are: Process planning and routing, Materials planning. Tools
planning, Loading, Scheduling etc.
1. Process planning and routing is a complete determination of the specific technological
process steps and their sequence to produce products at the desired quality, quantity and
cost. It determines the method of manufacturing a product selects the tools and
equipments, analyses how the manufacturing of the product will fit into the facilities.
Routing in particular prescribes the flow of work in the plant and it is related to the
considerations of layout, temporary locations for raw materials and components and
materials handling systems.
2. A material planning is a process which determines the requirements of various raw
materials/subassemblies by considering the trade-off between various cost components like,
carrying cost, ordering cost, shortage cost, and so forth.
3. Tools’ planning determines the requirements of various tools by taking process specification
(surface finish, length of the job, overall depth of cut etc.), material specifications (type of
material used, hardness of the material, shape and size of the material etc.) and equipment
specifications (speed range, feed range, depth of cut range etc.).
4. Loading is the process of assigning jobs to several machines such that there is a load balance
among the machines. This is relatively a complex task, which can be managed with the help
of efficient heuristic procedures.
5. Scheduling is the time phase of loading and determines when and in what sequence the
work will be carried out. This fixes the starting as well as the finishing time for each job.
Action Phase
Action phase has the major step of dispatching. Dispatching is the transition from planning
phase to action phase. In this phase, the worker is ordered to start manufacturing the product.
The tasks which are included in dispatching are job order, store issue order, tool order, time
ticket, inspection order, move order etc.
The job order number is the key item which is to be mentioned in all other reports/orders.

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 Stores issue order gives instruction to stores to issue materials for manufacturing the product
as per product specifications. As per tooling requirements for manufacturing the product,
the tool Order instruct the tool room to issue necessary tools.
Time ticket is nothing but a card which is designed to note down the actual time taken at
various processes. This information is used for deciding the costs for future jobs of similar
nature and also for performing variance analysis, which helps to exercise control.
Job order is the official authorization to the shop floor to start manufacturing the product.
Generally, the process sequence will contain some testing and inspection. So, these are to be
instructed to inspection wing in the form of inspection order for timely testing and inspection
so that the amount of rework is minimized. The manufacture of product involves moving raw
materials/subassemblies to the main line. This is done by a well-designed materials handling
system. So, proper instruction is given to the materials handling facilities for major movements
of materials/subassemblies in the form of a move order. Movements which involve less
distance and fewer loads are managed at the shop floor level based on requests from
operators.

Control Phase
the control phase has the following two major modules:
1. Progress reporting, and
2. Corrective action.
1. PROGRESS REPORTING
In progress reporting, the data regarding what is happening with the job is collected. Also, it
helps to make comparison with the present level of performance. The various data
pertaining to materials rejection, process variations, equipment failures, operator efficiency,
operator absenteeism, tool life, etc., are collected and analyzed for the purpose of progress
reporting. These data are used for performing variance analysis, which would help us to
identify critical areas that deserve immediate attention for corrective actions.
2. CORRECTIVE ACTION
The tasks under corrective action primarily make provisions for an unexpected event. Some
examples of corrective actions are creating schedule flexibility, schedule modifications,

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capacity modifications, make or buy decisions, expediting the work, pre-planning, and so on.
Due to unforeseen reasons such as, machine breakdown, labor absenteeism, too much
rejection due to poor material quality etc., it may not be possible to realize the schedule as
per the plan. Under such condition, it is better to reschedule the whole product mix so that
we get a clear picture of the situation to progress further. Under such situation, it is to be re-
examined for selecting appropriate course of action. Expediting means taking action if the
progress reporting indicates deviations from the originally set targets. Pre-planning of the
whole affair becomes essential in case the expediting fails to bring the deviated plan to its
right path

Gantt

A Gantt chart is a type of bar chart that illustrates a project schedule, named after its
inventor, Henry Gantt (1861–1919), who designed such a chart around the years 1910–
1915. Modern Gantt charts also show the dependency relationships between activities and
current schedule status.

Definition

A Gantt chart is a type of bar chart that illustrates a project schedule. This chart lists the tasks
to be performed on the vertical axis, and time intervals on the horizontal axis. The width of the
horizontal bars in the graph shows the duration of each activity. Gantt charts illustrate the start
and finish dates of the terminal elements and summary elements of a project. Terminal
elements and summary elements constitute the work breakdown structure of the project.
Modern Gantt charts also show the dependency (i.e., precedence network) relationships
between activities. Gantt charts can be used to show current schedule status using percent-
complete shadings and a vertical "TODAY" line as shown here.

Gantt charts are sometimes equated with bar charts.

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Gantt charts are usually created initially using an early start time approach, where each task is
scheduled to start immediately when its prerequisites are complete. This method maximizes
the float time available for all tasks.

PPC in Mass, Batch, and Job Order Manufacturing-

They are broadly classified into three categories:

 Job shop production

 Batch production
 Mass production

Job Production:

In this system products are made to satisfy a specific order. However that order may be
produced-

 only once
 or at irregular time intervals as and when new order arrives
 or at regular time intervals to satisfy a continuous demand

The following are the important characteristics of job shop type production system:

 Machines and methods employed should be general purpose as product changes are
quite frequent.
 Planning and control system should be flexible enough to deal with the frequent
changes in product requirements.
 Man power should be skilled enough to deal with changing work conditions.
 Schedules are actually nonexistent in this system as no definite data is available on the
product.
 In process inventory will usually be high as accurate plans and schedules do not exist.
 Product cost is normally high because of high material and labor costs.

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  Grouping of machines is done on functional basis (i.e. as lathe section, milling section
etc.)
 This system is very flexible as management has to manufacture varying product types.
 Material handling systems are also flexible to meet changing product requirements.

Batch Production

Batch production is the manufacture of a number of identical articles either to meet a specific
order or to meet a continuous demand. Batch can be manufactured either-

 only once
 or repeatedly at irregular time intervals as and when demand arise
 or repeatedly at regular time intervals to satisfy a continuous demand

The following are the important characteristics of batch type production system:

 As final product is somewhat standard and manufactured in batches, economy of scale

can be availed to some extent.
 Machines are grouped on functional basis similar to the job shop manufacturing.
 Semi automatic, special purpose automatic machines are generally used to take
advantage of the similarity among the products.
 Labor should be skilled enough to work upon different product batches.
 In process inventory is usually high owing to the type of layout and material handling
policies adopted.
 Semi automatic material handling systems are most appropriate in conjunction with the
semi automatic machines.
 Normally production planning and control is difficult due to the odd size and non
repetitive nature of order.

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Mass Production

In mass production, same type of product is manufactured to meet the continuous demand of
the product. Usually demand of the product is very high and market is going to sustain same
demand for sufficiently long time.

The following are the important characteristics of mass production system:

 As same product is manufactured for sufficiently long time, machines can be laid down
in order of processing sequence. Product type layout is most appropriate for mass
production system.
 Standard methods and machines are used during part manufacture.
 Most of the equipments are semi automatic or automatic in nature.
 Material handling is also automatic (such as conveyors).
 Semi skilled workers are normally employed as most of the facilities are automatic.
 As product flows along a pre defined line, planning and control of the system is much
easier.
 Cost of production is low owing to the high rate of production.
 In process inventories are low as production scheduling is simple and can be
implemented with ease.

Aggregate planning:

Aggregate planning is an intermediate term planning decision. It is the process of planning the
quantity and timing of output over the intermediate time horizon (3 months to one year).
Within this range, the physical facilities are assumed to –10 be fixed for the planning period.
Therefore, fluctuations in demand must be met by varying labor and inventory schedule.
Aggregate planning seeks the best combination to minimize costs.

Aggregate Planning Strategies

The variables of the production system are labor, materials and capital. More labor effort is
required to generate higher volume of output. Hence, the employment and use of overtime

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 (OT) are the two relevant variables. Materials help to regulate output. The alternatives
available to the company are inventories, back ordering or subcontracting of items. These
controllable variables constitute pure strategies by which fluctuations in demand and
uncertainties in production activities can be accommodated by using the following steps:
1. Vary the size or the workforce: Output is controlled by hiring or laying off workers in
proportion to changes in demand.
2. Vary the hours worked: Maintain the stable workforce, but permit idle time when there is a
slack and permit overtime (OT) when demand is peak.
3. Vary inventory levels: Demand fluctuations can be met by large amount of inventory.
4. Subcontract: Upward shift in demand from low level. Constant production rates can be met
by using subcontractors to provide extra capacity.
Aggregate Planning Guidelines
The following are the guidelines for aggregate planning:
1. Determine corporate policy regarding controllable variables.
2. Use a good forecast as a basis for planning.
3. Plan in proper units of capacity.
4. Maintain the stable workforce.
5. Maintain needed control over inventories.
6. Maintain flexibility to change.
7. Respond to demand in a controlled manner.
8. Evaluate planning on a regular base.

Master Scheduling, MRP, CRP:

Maintenance management & Industrial Safety:

TYPES OF MAINTENANCE IN PRODUCTION MANAGEMENT PRODUCTION

The design life of most equipment requires periodic maintenance. Belts need adjustment,
alignment needs to be maintained, proper lubrication on rotating equipment is required, and so

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on. In some cases, certain components need replacement, e.g., a wheel bearing on a motor
vehicle, to ensure the main piece of equipment (in this case a car) last for its design life.
Different approaches have been developed to know how maintenance can be performed to
ensure equipment reaches or exceeds its design life. In addition to waiting for a piece of
equipment to fail (reactive maintenance) the other approaches are preventive maintenance,
predictive maintenance, or reliability centered maintenance.

Types of Maintenance Management

The types of maintenance management are

Breakdown (Reactive) Maintenance

Breakdown maintenance is basically the ‘run it till it breaks’ maintenance mode. No actions or
efforts are taken to maintain the equipment as the designer originally intended to ensure
design life is reached. Studies as recent indicate that, this is still the predominant mode of
maintenance.
Advantages to breakdown maintenance can be viewed as a double-edged sword. If we are
dealing with new equipment, we can expect minimal incidents of failure. If our maintenance
program is purely reactive, we will not expend manpower or incur capital cost until something
breaks. Since we do not see any associated maintenance cost, we could view this period as
saving money. In reality, during the time we believe we are saving maintenance and capital
cost, we are really spending more money than we would have under a different maintenance
approach. We are spending more money associated with capital cost because, while waiting for
the equipment to break, we are shortening the life of the equipment resulting in more frequent
replacement. We may incur cost upon failure of the primary device associated with its failure
causing the failure of a secondary device. This is an increased cost we would not have
experienced if our maintenance program was more proactive.

Our labor cost associated with repair will probably be higher than normal because the failure
will most likely require more extensive repairs than would have been required if the piece of
equipment had not been run to failure. Chances are the piece of equipment will fail during off
hours or close to the end of the normal workday. If it is a critical piece of equipment that needs

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 to be back on-line quickly, we will have to pay maintenance overtime cost. Since we expect to
run equipment to failure, we will require a large material inventory of repair parts. This is a cost
we could minimize under a different maintenance strategy.

Advantages
1. Involves low cost investment for maintenance.
2. Less staff is required.
Disadvantages
1. Increased cost due to unplanned downtime of equipment.
2. Increased labor cost, especially if overtime is needed.
3. Cost involved with repair or replacement of equipment.
4. Possible secondary equipment or process damage from equipment failure.
5. Inefficient use of staff resources.
Preventive Maintenance
Preventive maintenance can be defined as, “Actions performed on a time or machine-run-
based schedule that detect, preclude, or mitigate degradation of a component or system with
the aim of sustaining or extending its useful life through controlling degradation to an
acceptable level.” Preventive maintenance is a means to increase the reliability of their
equipment. By simply expending the necessary resources to conduct maintenance activities
intended by the equipment designer, equipment life is extended and its reliability is increased.
In addition to an increase in reliability, lot of amount will be saved over that of a program just
using reactive maintenance. Studies indicate that this savings can amount to as much as 12% to
18% on the average.
Advantages
1. Cost effective in many capital intensive processes.
2. Flexibility allows for the adjustment of maintenance periodicity.
3. Increased component life cycle.
4. Energy savings.
5. Reduced equipment or process failure.
6. Estimated 12% to 18% cost savings over reactive maintenance program.

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 Disadvantages
1. Catastrophic failures still likely to occur.
2. Labor intensive.
3. Includes performance of unneeded maintenance.
4. Potential for incidental damage to components in conducting unneeded maintenance.
Depending on the facilities current maintenance practices, present equipment reliability, and
facility downtime, there is little doubt that many facilities purely reliant on reactive
maintenance could save much more than 18% by instituting a proper preventive maintenance
program.

While preventive maintenance is not the optimum maintenance program, it does have several
advantages over that of a purely reactive program. By performing the preventive maintenance
as the equipment designer envisioned, we will extend the life of the equipment closer to
design. This translates into dollar savings. Preventive maintenance (lubrication, filter change,
etc.) will generally run the equipment more efficiently resulting in dollar savings. While we will
not prevent equipment catastrophic failures, we will decrease the number of failures.
Minimizing failures translate into maintenance and capital cost savings.

Predictive Maintenance
Predictive maintenance can be defined as “Measurements that detect the onset of a
degradation mechanism, thereby allowing causal stressors to be eliminated or controlled prior
to any significant deterioration in the component physical state. Results indicate current and
future functional capability”.
Basically, predictive maintenance differs from preventive maintenance by basing maintenance
need on the actual condition of the machine rather than on some preset schedule. Preventive
maintenance is time-based. Activities such as changing lubricant are based on time, like
calendar time or equipment run time. For example, most people change the oil in their vehicles
every 3,000 to 5,000 miles travelled. This is effectively basing the oil change needs on
equipment run time. No concern is given to the actual condition and performance capability of
the oil. It is changed because it is time. This methodology would be analogous to a preventive
maintenance task. If, on the other hand, the operator of the car discounted the vehicle run time

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Newton’s Engineering College,MAcherla
 and had the oil analyzed at some periodicity to determine its actual condition and lubrication
properties, he may be able to extend the oil change until the vehicle had travelled 10,000 miles.
This is the fundamental difference between predictive maintenance and preventive
maintenance, whereby predictive maintenance is used to define needed maintenance task
based on quantified material/equipment condition.

There are many advantages of predictive maintenance. A well-orchestrated predictive

maintenance program will eliminate catastrophic equipment failures. Schedule of maintenance
activities can be made to minimize or delete overtime cost. It is possible to minimize inventory
and order parts, as required, well ahead of time to support the downstream maintenance
needs and optimize the operation of the equipment, saving energy cost and increasing plant
reliability. Past studies have estimated that a properly functioning predictive maintenance
program can provide a savings of 8% to 12% over a program utilizing preventive maintenance
alone. Depending on a facility’s reliance on reactive maintenance and material condition, it
could easily recognize savings opportunities exceeding 30% to 40%. Independent surveys
indicate the following industrial average savings resultant from initiation of a functional
predictive maintenance program:

1. Return on investment—10 times

2. Reduction in maintenance costs—25% to 30%
3. Elimination of breakdowns—70% to 75%
4. Reduction in downtime—35% to 45%
5. Increase in production—20% to 25%.
Advantages
1. Increased component operational life/ availability.
2. Allows for pre-emptive corrective actions.
3. Decrease in equipment or process downtime.
4. Decrease in costs for parts and labor.
5. Better product quality.
6. Improved worker and environmental safety.
7. Improved worker moral.

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8. Energy savings.
9. Estimated 8% to 12% cost savings over preventive maintenance program.
Disadvantages
1. Increased investment in diagnostic equipment.
2. Increased investment in staff training.
3. Savings potential not readily seen by management.
Concept of Reliability in Maintenance
Reliability is the probability of survival under a given operating environment. For example, the
time between consecutive failures of a refrigerator where continuous working is required is a
measure of its reliability. If this time is more, the product is said to have high reliability.
In a textile mill, generally the light is maintained at a minimum specified level. To achieve this,
let us assume that there are 100 bulbs in use and the guaranteed life time of these bulbs is
5000 hours. If we collect statistics about the number of bulbs survived till 5000 hours, we can
compute the reliability of the bulbs. In this case,

Reliability =

Failure rate =

Number of bulbs survived till the specified time limit

Number of bulbs used
If the number of bulbs survived till 5000 hours is 80, then we can say that the reliability is 0.8
(i.e., 80/100) The reliability of railway signaling system, aircraft, and power plant are some of
the interesting examples for demonstrating the reliability concept. In these cases, a failure will
lead to heavy penalty.
The concept of reliability can be matched with systems concept. Generally,
products/equipments will have many components which may function with serial relationship
or parallel relationship. So, the individual component’s reliability affects the reliability of the
product. Hence, enough attention must be given at the design, stage such that the product’s
reliability is maximized. The cost of maintenance is also to be considered along with the
reliability while improving it.

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 The general failure pattern of any product is given in the following figure. This is called bath-tub
curve. In the figure, there will be large number of failures in the early period. This is mainly due
to non-alignment while shipping the product, or misfit while manufacturing (assembling), or
very high initial friction between moving parts, etc.

Product failure rate

Reliability Improvement
The reliability of a system/product depends on many factors. So, we should concentrate at the
grassroot level to improve product’s reliability. Some of the ways of improving systems
reliability are listed below:
 Improved design of components
 Simplification of product structure
 Usage of better production equipments
 Better quality standards
 Better testing standards
 Sufficient number of standby units
 Usage of preventive maintenance if necessary at appropriate time.

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Newton’s Engineering College,MAcherla
Location & Layout Planning:

PLANT LOCATION AND LAYOUT INTRODUCTION PRODUCTION AND OPERATIONS

MANAGEMENT

Plant location and Layout in Production Management

Plant location or the facilities location problem is an important strategic level decision making
for an organization. One of the key features of a conversion process (manufacturing system) is
the efficiency with which the products (services) are transferred to the customers. This fact will
include the determination of where to place the plant or facility.
The selection of location is a key-decision as large investment is made in building plant and
machinery. It is not advisable or not possible to change the location very often. So an improper
location of plant may lead to waste of all the investments made in building and machinery,
equipment.

Before a location for a plant is selected, long range forecasts should be made anticipating
future needs of the company. The plant location should be based on the company’s expansion
plan and policy, diversification plan for the products, changing market conditions, the changing
sources of raw materials and many other factors that influence the choice of the location
decision. The purpose of the location study is to find an optimum location one that will result in
the greatest advantage to the organization.

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 FACTORS INFLUENCING PLANT LOCATION IN OPERATION MANAGEMENT PRODUCTION AND
OPERATIONS MANAGEMENT

Factors affecting Facility location decision in Operations Management

Facility location is the process of determining a geographic site for a firm’s operations.
Managers of both service and manufacturing organizations must weigh many factors when
assessing the desirability of a particular site, including proximity to customers and suppliers,
labor costs, and transportation costs.

Location conditions are complex and each comprises a different Characteristic of a tangible (i.e.
Freight rates, production costs) and non-tangible (i.e. reliability, frequency security, quality)
nature.

Location conditions are hard to measure. Tangible cost based factors such as wages and
products costs can be quantified precisely into what makes locations better to compare. On the
other hand non-tangible features, which refer to such characteristics as reliability, availability
and security, can only be measured along an ordinal or even nominal scale. Other non-tangible
features like the percentage of employees that are unionized can be measured as well. To sum
this up non-tangible features are very important for business location decisions.

It is appropriate to divide the factors, which influence the plant location or facility location on
the basis of the nature of the organization as

1. General locational factors, which include controllable and uncontrollable factors for all type
of organizations.
2. Specific locational factors specifically required for manufacturing and service organizations.
Location factors can be further divided into two categories: Dominant factors are those derived
from competitive priorities (cost, quality, time, and flexibility) and have a particularly strong
impact on sales or costs. Secondary factors also are important, but management may downplay
or even ignore some of them if other factors are more important.

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 General Locational Factors
Following are the general factors required for location of plant in case of all types of
organisations.
CONTROLLABLE FACTORS
1. Proximity to markets.
2. Supply of materials
3. Transportation facilities
4. Infrastructure availability
5. Labour and wages
6. External economies
7. Capital

Factors influencing plant location

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Newton’s Engineering College,MAcherla
 UNCONTROLLABLE FACTORS
8. Government policy
9. Climate conditions
10. Supporting industries and services
11. Community and labor attitudes
12. Community Infrastructure
CONTROLLABLE FACTORS
1. Proximity to markets:
Every company is expected to serve its customers by providing goods and services at the
time needed and at reasonable price organizations may choose to locate facilities close to
the market or away from the market depending upon the product. When the buyers for the
product are concentrated, it is advisable to locate the facilities close to the market. Locating
nearer to the market is preferred if
 The products are delicate and susceptible to spoilage.
 After sales services are promptly required very often.
 Transportation cost is high and increase the cost significantly.
 Shelf life of the product is low.
Nearness to the market ensures a consistent supply of goods to customers and reduces the
cost of transportation.
2. Supply of raw material:
It is essential for the organization to get raw material in right qualities and time in order to
have an uninterrupted production. This factor becomes very important if the materials are
perishable and cost of transportation is very high.
General guidelines suggested by Yaseen regarding effects of raw materials on plant location
are:

 When a single raw material is used without loss of weight, locate the plant at the raw
material source, at the market or at any point in between.

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Newton’s Engineering College,MAcherla
  When weight loosing raw material is demanded, locate the plant at the raw material
source.
 When raw material is universally available, locate close to the market area.
 If the raw materials are processed from variety of locations, the plant may be situated so
as to minimize total transportation costs.
Nearness to raw material is important in case of industries such as sugar, cement, jute and
cotton textiles.
3. Transportation facilities:
Speedy transport facilities ensure timely supply of raw materials to the company and
finished goods to the customers. The transport facility is a prerequisite for the location of
the plant. There are five basic modes of physical transportation, air, road, rail, water and
pipeline. Goods that are mainly intended for exports demand a location near to the port or
large airport. The choice of transport method and hence the location will depend on relative
costs, convenience, and suitability. Thus transportation cost to value added is one of the
criteria for plant location.
4. Infrastructure availability:
The basic infrastructure facilities like power, water and waste disposal, etc., become the
prominent factors in deciding the location. Certain types of industries are power hungry e.g.,
aluminum and steel and they should be located close to the power station or location where
uninterrupted power supply is assured throughout the year. The non-availability of power
may become a survival problem for such industries. Process industries like paper, chemical,
cement, etc., require continuous. Supply of water in large amount and good quality, and
mineral content of water becomes an important factor. A waste disposal facility for process
industries is an important factor, which influences the plant location.
5. Labor and wages:
The problem of securing adequate number of labor and with skills specific is a factor to be
considered both at territorial as well as at community level during plant location. Importing
labor is usually costly and involve administrative problem. The history of labor relations in a
prospective community is to be studied. Prospective community is to be studied.

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Newton’s Engineering College,MAcherla
 Productivity of labor is also an important factor to be considered. Prevailing wage pattern,
cost of living and industrial relation and bargaining power of the unions’ forms in important
considerations.
6. External economies of scale:
External economies of scale can be described as urbanization and locational economies of
scale. It refers to advantages of a company by setting up operations in a large city while the
second one refers to the “settling down” among other companies of related Industries. In
the case of urbanization economies, firms derive from locating in larger cities rather than in
smaller ones in a search of having access to a large pool of labor, transport facilities, and as
well to increase their markets for selling their products and have access to a much wider
range of business services.
Location economies of scale in the manufacturing sector have evolved over time and have
mainly increased competition due to production facilities and lower production costs as a result
of lower transportation and logistical costs. This led to manufacturing districts where many
companies of related industries are located more or less in the same area. As large corporations
have realized that inventories and warehouses have become a major cost factor, they have
tried reducing inventory costs by launching “Just in Time” production system (the so called
Kanban System). This high efficient production system was one main factor in the Japanese car
industry for being so successful. Just in time ensures to get spare parts from suppliers within
just a few hours after ordering. To fulfill these criteria corporations have to be located in the
same area increasing their market and service for large corporations.

7. Capital:
By looking at capital as a location condition, it is important to distinguish the physiology of
fixed capital in buildings and equipment from financial capital. Fixed capital costs as building
and construction costs vary from region to region. But on the other hand buildings can also
be rented and existing plants can be expanded. Financial capital is highly mobile and does
not very much influence decisions. For example, large Multinational Corporations such as
Coca- Cola operate in many different countries and can raise capital where interest rates are
lowest and conditions are most suitable.

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Newton’s Engineering College,MAcherla
 Capital becomes a main factor when it comes to venture capital. In that case young, fast
growing (or not) high tech firms are concerned which usually have not many fixed assets. These
firms particularly need access to financial capital and also skilled educated employees.

UNCONTROLLABLE FACTORS
8. Government policy:
The policies of the state governments and local bodies concerning labor laws, building
codes, safety, etc., are the factors that demand attention. In order to have a balanced
regional growth of industries, both central and state governments in our country offer the
package of incentives to entrepreneurs in particular locations. The incentive package may be
in the form of exemption from a safes tax and excise duties for a specific period, soft loan
from financial institutions, subsidy in electricity charges and investment subsidy. Some of
these incentives may tempt to locate the plant to avail these facilities offered.
9. Climatic conditions:
The geology of the area needs to be considered together with climatic conditions (humidity,
temperature). Climates greatly influence human efficiency and behavior. Some industries
require specific climatic conditions e.g., textile mill will require humidity.
10. Supporting industries and services:
Now a day the manufacturing organization will not make all the components and parts by
itself and it subcontracts the work to vendors. So, the source of supply of component parts
will be the one of the factors that influences the location.
The various services like communications, banking services professional consultancy services
and other civil amenities services will play a vital role in selection of a location.

11. community and labor attitudes:

Community attitude towards their work and towards the prospective industries can make or
mar the industry. Community attitudes towards supporting trade union activities are
important criteria. Facility location in specific location is not desirable even though all factors
are favoring because of labor attitude towards management, which brings very often the
strikes and lockouts.
12. Community infrastructure and amenity:

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 All manufacturing activities require access to a community infrastructure, most notably
economic overhead capital, such as roads, railways, port facilities, power lines and service
facilities and social overhead capital like schools, universities and hospitals.
These factors are also needed to be considered by location decisions as infrastructure is
enormously expensive to build and for most manufacturing activities the existing stock of
infrastructure provides physical restrictions on location possibilities.

Specific Location Factors for Manufacturing Organization

DOMINANT FACTORS
Factors dominating location decisions for new manufacturing plants can be broadly classified in
six groups. They are listed in the order of their importance as follows.
1. Favorable labor climate
2. Proximity to markets
3. Quality of life
4. Proximity to suppliers and resources
5. Utilities, taxes, and real estate costs
1. Favorable labor climate:
A favorable labor climate may be the most important factor in location decisions for labour-
intensive firms in industries such as textiles, furniture, and consumer electronics. Labor
climate includes wage rates, training requirements, attitudes toward work, worker
productivity, and union strength. Many executives consider weak unions or al low
probability of union organizing efforts as a distinct advantage.
2. Proximity to markets:
After determining where the demand for goods and services is greatest, management must
select a location for the facility that will supply that demand. Locating near markets is
particularly important when the final goods are bulky or heavy and outbound transportation
rates are high. For example, manufacturers of products such as plastic pipe and heavy
metals all emphasize proximity to their markets.
3. Quality of life:

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Newton’s Engineering College,MAcherla
 Good schools, recreational facilities, cultural events, and an attractive lifestyle contribute to
quality of life. This factor is relatively unimportant on its own, but it can make the difference
in location decisions.
4. Proximity to suppliers and resources:
In many companies, plants supply parts to other facilities or rely on other facilities for
management and staff support. These require frequent coordination and communication,
which can become more difficult as distance increases.
5. Utilities, taxes, and real estate costs:
Other important factors that may emerge include utility costs (telephone, energy, and
water), local and state taxes, financing incentives offered by local or state governments,
relocation costs, and land costs.
SECONDARY FACTORS
There are some other factors needed to be considered, including room for expansion,
construction costs, accessibility to multiple modes of transportation, the cost of shuffling
people and materials between plants, competition from other firms for the workforce,
community attitudes, and many others. For global operations, firms are emphasizing local
employee skills and education and the local infrastructure.
Specific Locational Factors for Service Organization
DOMINANT FACTORS
The factors considered for manufacturers are also applied to service providers, with one
important addition the impact of location on sales and customer satisfaction. Customers usually
look about how close a service facility is, particularly if the process requires considerable
customer contact.
PROXIMITY TO CUSTOMERS
Location is a key factor in determining how conveniently customers can carry on business with
a firm. For example, few people would like to go to remotely located dry cleaner or
supermarket if another is more convenient. Thus the influence of location on revenues tends to
be the dominant factor.
TRANSPORTATION COSTS AND PROXIMITY TO MARKETS

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For warehousing and distribution operations, transportation costs and proximity to markets are
extremely important. With a warehouse nearby, many firms can hold inventory closer to the
customer, thus reducing delivery time and promoting sales.
LOCATION OF COMPETITORS
One complication in estimating the sales potential at different location is the impact of
competitors. Management must not only consider the current location of competitors but also
try to anticipate their reaction to the firm’s new location. Avoiding areas where competitors are
already well established often pays. However, in some industries, such as new-car sales
showrooms and fast- food chains, locating near competitors is actually advantageous. The
strategy is to create a critical mass, whereby several competing firms clustered in one location
attract more customers than the total number who would shop at the same stores at scattered
locations. Recognizing this effect, some firms use a follow –the leader strategy when selecting
new sites.
SECONDARY FACTORS
Retailers also must consider the level of retail activity, residential density, traffic flow, and site
visibility. Retail activity in the area is important, as shoppers often decide on impulse to go
shopping or to eat in a restaurant. Traffic flows and visibility are important because businesses’
customers arrive in cars. Visibility involves distance from the street and size of nearby buildings
and signs. High residential density ensures nighttime and weekend business when the
population in the area fits the firm’s competitive priorities and target market segment.
MEASUREMENT OF CAPACITY PLANNING PRODUCTION AND OPERATIONS MANAGEMENT

Design of the production system involves planning for the inputs, conversion process and
outputs of production operation. The effective management of capacity is the most important
responsibility of production management. The objective of capacity management (i.e., planning
and control of capacity) is to match the level of operations to the level of demand.

Capacity planning in Production and Operation Management

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Newton’s Engineering College,MAcherla
 Capacity planning is to be carried out keeping in mind future growth and expansion plans,
market trends, sales forecasting, etc. It is a simple task to plan the capacity in case of stable
demand. But in practice the demand will be seldom stable. The fluctuation of demand creates
problems regarding the procurement of resources to meet the customer demand. Capacity
decisions are strategic in nature. Capacity is the rate of productive capability of a facility.
Capacity is usually expressed as volume of output per period of time.
Production managers are more concerned about the capacity for the following reasons:
Sufficient capacity is required to meet the customers demand in time.
 Sufficient capacity is required to meet the customers demand in time.
 Capacity affects the cost efficiency of operations.
 Capacity affects the scheduling system.
 Capacity creation requires an investment.
Capacity planning is the first step when an organization decides to produce more or new
products.

Capacity Measurement in Operations Management

Measurement of Capacity Planning

The capacity of the manufacturing unit can be expressed in number of units of output per
period. In some situations measuring capacity is more complicated when they manufacture
multiple products. In such situations, the capacity is expressed as man-hours or machine hours.
The relationship between capacity and output.
1. Design capacity:
Designed capacity of a facility is the planned or engineered rate of output of goods or
services under normal or full scale operating conditions. For example, the designed capacity
of the cement plant is 100 TPD (Tonnes per day). Capacity of the sugar factory is 150 tonnes
of sugarcane crushing per day.
2. System capacity:
System capacity is the maximum output of the specific product or product mix the system of
workers and machines is capable of producing as an integrated whole. System capacity is

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Newton’s Engineering College,MAcherla
 less than design capacity or at the most equal, because of the limitation of product mix,
quality specification, breakdowns. The actual is even less because of many factors affecting
the output such as actual demand, downtime due to machine/equipment failure,
unauthorized absenteeism.

Capacity and output relationship

The system capacity is less than design capacity because of long range uncontrollable
factors. The actual output is still reduced because of short-term effects such as, breakdown
of equipment, inefficiency of labor. The system efficiency is expressed as ratio of actual
measured output to the system capacity.
System Efficiency (SE)=
Actual output
System capacity
3. Licensed capacity:
Capacity licensed by the various regulatory agencies or government authorities. This is the
limitation on the output exercised by the government.
4. Installed capacity:
The capacity provided at the time of installation of the plant is called installed capacity.
5. Rated capacity:

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Newton’s Engineering College,MAcherla
 Capacity based on the highest production rate established by actual trials is referred to as
rated capacity.
Process of Capacity Planning
Capacity planning is concerned with defining the long-term and the short-term capacity needs
of an organization and determining how those needs will be satisfied. Capacity planning
decisions are taken based upon the consumer demand and this is merged with the human,
material and financial resources of the organization.
Capacity requirements can be evaluated from two perspectives long-term capacity strategies
and short-term capacity strategies.

1. LONG-TERM CAPACITY STRATEGIES

Long-term capacity requirements are more difficult to determine because the future
demand and technology are uncertain. Forecasting for five or ten years into the future is
more risky and difficult. Even sometimes company’s today’s products may not be existing in
the future. Long range capacity requirements are dependent on marketing plans, product
development and life- cycle of the product. Long-term capacity planning is concerned with
accommodating major changes that affect overall level of the output in long-term.
Marketing environmental assessment and implementing the long-term capacity plans in a
systematic manner are the major responsibilities of management. Following parameters will
affect long range capacity decisions.

1. Multiple products: Company’s produce more than one product using the same facilities
in order to increase the profit. The manufacturing of multiple products will reduce the
risk of failure. Having more than one product helps the capacity planners to do a better
job. Because products are in different stages of their life-cycles, it is easy to schedule
them to get maximum capacity utilization.
2. Phasing in capacity: In high technology industries, and in industries where technology
developments are very fast, the rate of obsolescence is high. The products should be
brought into the market quickly. The time to construct the facilities will be long and there
is no much time as the products should be introduced into the market quickly. Here the

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Newton’s Engineering College,MAcherla
 solution is phase in capacity on modular basis. Some commitment is made for building
funds and men towards facilities over a period of 3–5 years. This is an effective way of
capitalizing on technological breakthrough.
3. Phasing out capacity:The outdated manufacturing facilities cause excessive plant
closures and down time. The impact of closures is not limited to only fixed costs of plant
and machinery. Thus, the phasing out here is done with humanistic way without affecting
the community. The phasing out options makes alternative arrangements for men like
shifting them to other jobs or to other locations, compensating the employees, etc.
2. SHORT-TERM CAPACITY STRATEGIES
Managers often use forecasts of product demand to estimate the short-term workload the
facility must handle. Managers looking ahead up to 12 months, anticipate output
requirements for different products, and services. Managers then compare requirements
with existing capacity and then take decisions as to when the capacity adjustments are
needed.

For short-term periods of up to one year, fundamental capacity is fixed. Major facilities will
not be changed. Many short-term adjustments for increasing or decreasing capacity are
possible. The adjustments to be required depend upon the conversion process like whether
it is capital intensive or labor intensive or whether product can be stored as inventory.

Capital intensive processes depend on physical facilities, plant and equipment. Short-term
capacity can be modified by operating these facilities more or less intensively than normal.
In labor intensive processes short-term capacity can be changed by laying off or hiring
people or by giving overtime to workers. The strategies for changing capacity also depend
upon how long the product can be stored as inventory.

The short-term capacity strategies are:

1. Inventories: Stock of finished goods during slack periods to meet the demand during peak
period.

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 2. Backlog:During peak periods, the willing customers are requested to wait and their
orders are fulfilled after a peak demand period.
3. Employment level (hiring or firing): Hire additional employees during peak demand
period and layoff employees as demand decreases.
4. Employee training: Develop multi-skilled employees through training so that they can be
rotated among different jobs. The multi-skilling helps as an alternative to hiring
employees.
5. Subcontracting: During peak periods, hire the capacity of other firms temporarily to
make the component parts or products.
6. Process design:Change job contents by redesigning the job.
ROUTING PRODUCTION AND OPERATIONS MANAGEMENT

Routing and Scheduling in Production Planning and Control

Routing may be defined as the selection of path which each part of the product will follow
while being transformed from raw materials to finished products. Path of the product will also
give sequence of operation to be adopted while being manufactured. In other way, routing
means determination of most advantageous path to be followed from department to
department and machine to machine till raw material gets its final shape, which involves the
following steps:

 Type of work to be done on product or its parts.

 Operation required to do the work.
 Sequence of operation required.
 Where the work will be done.
 A proper classification about the personnel required and the machine for doing the work.
For effective production control of a well-managed industry with standard conditions, the
routing plays an important role, i.e., to have the best results obtained from available plant
capacity. Thus routing provides the basis for scheduling, dispatching and follow-up.

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 Techniques of Routing
While converting raw material into required goods different operations are to be performed
and the selection of a particular path of operations for each piece is termed as ‘Routing’. This
selection of a particular path, i.e. sequence of operations must be the best and cheapest to
have the lowest cost of the final product. The various routing techniques are:
1. Route card: This card always accompanies with the job throughout all operations. This
indicates the material used during manufacturing and their progress from one operation to
another. In addition to this the details of scrap and good work produced are also recorded
2. Work sheet: It contains
a. Specifications to be followed while manufacturing.
b. Instructions regarding routing of every part with identification number of machines and
This sheet is made for manufacturing as well as for maintenance.
3. Route sheet: It deals with specific production order. Generally made from operation sheets.
One sheet is required for each part or component of the order. This includes the following:

a. Number and other identification of order.

b. Symbol and identification of part.
c. Number of pieces to be made.
d. Number of pieces in each lot if put through in lots.
e. Operation data which includes:

i. List of operation on the part.

ii. Department in which operations are to be performed.
iii. Machine to be used for each operation.
iv. Fixed sequence of operation, if any.
4. Move order: Though this is document needed for production control, it is never used for
routing system. Move order is prepared for each operation as per operation sheet. On this
the quantity passed forward, scrapped and to be rectified are recorded. It is returned to
planning office when the operation is completed.

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 SCHEDULING PRODUCTION AND OPERATIONS MANAGEMENT

Scheduling in Production and Operation Management

Scheduling can be defined as “prescribing of when and where each operation necessary to
manufacture the product is to be performed.” It is also defined as “establishing of times at
which to begin and complete each event or operation comprising a procedure”. The principle
aim of scheduling is to plan the sequence of work so that production can be systematically
arranged towards the end of completion of all products by due date.

Principles of Scheduling
1. The principle of optimum task size: Scheduling tends to achieve maximum efficiency when
the task sizes are small, and all tasks of same order of magnitude.
2. Principle of optimum production plan: The planning should be such that it imposes an equal
load on all plants.
3. Principle of optimum sequence: Scheduling tends to achieve the maximum efficiency when
the work is planned so that work hours are normally used in the same sequence.
Inputs to Scheduling
1. Performance standards: The information regarding the performance standards (standard
times for operations) helps to know the capacity in order to assign required machine hours
to the facility.
2. Units in which loading and scheduling is to be expressed.
3. Effective capacity of the work centre.
4. Demand pattern and extent of flexibility to be provided for rush orders.
5. Overlapping of operations.
6. Individual job schedules.
Scheduling Strategies
Scheduling strategies vary widely among firms and range from ‘no scheduling’ to very
sophisticated approaches. These strategies are grouped into four classes:

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1. Detailed scheduling: Detailed scheduling for specific jobs that are arrived from customers is
impracticable in actual manufacturing situation. Changes in orders, equipment breakdown,
and unforeseen events deviate the plans.
2. Cumulative scheduling: Cumulative scheduling of total work load is useful especially for long
range planning of capacity needs. This may load the current period excessively and under
load future periods. It has some means to control the jobs.
3. Cumulative detailed: Cumulative detailed combination is both feasible and practical
approach. If master schedule has fixed and flexible portions.
4. Priority decision rules: Priority decision rules are scheduling guides that are used
independently and in conjunction with one of the above strategies, i.e., first come first
serve. These are useful in reducing Work-In-Process (WIP) inventory.
Types of Scheduling
Types of scheduling can be categorized as forward scheduling and backward scheduling.
1. Forward scheduling
is commonly used in job shops where customers place their orders on “needed as soon as
possible” basis. Forward scheduling determines start and finish times of next priority job by
assigning it the earliest available time slot and from that time, determines when the job will
be finished in that work centre. Since the job and its components start as early as possible,
they will typically be completed before they are due at the subsequent work centers in the
routing. The forward method generates in the process inventory that are needed at
subsequent work centers and higher inventory cost. Forward scheduling is simple to use and
it gets jobs done in shorter lead times, compared to backward scheduling.
2. Backward scheduling
is often used in assembly type industries and commit in advance to specific delivery dates.
Backward scheduling determines the start and finish times for waiting jobs by assigning
them to the latest available time slot that will enable each job to be completed just when it
is due, but done before. By assigning jobs as late as possible, backward scheduling minimizes
inventories since a job is not completed until it must go directly to the next work centre on
its routing. Forward and backward scheduling methods are shown in the following figure.

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Newton’s Engineering College,MAcherla
Forward and backward scheduling

WORK STUDY INTRODUCTION PRODUCTION AND OPERATIONS MANAGEMENT

Productivity has now become an everyday watch word. It is crucial to the welfare of industrial
firm as well as for the economic progress of the country. High productivity refers to doing the
work in a shortest possible time with least expenditure on inputs without sacrificing quality and
with minimum wastage of resources.

Work-study forms the basis for work system design. The purpose of work design is to identify
the most effective means of achieving necessary functions. This work-study aims at improving
the existing and proposed ways of doing work and establishing standard times for work
performance. Work-study is encompassed by two techniques, i.e., method study and work
measurement.

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Newton’s Engineering College,MAcherla
“Method study is the systematic recording and critical examination of existing and proposed
ways of doing work, as a means of developing and applying easier and more effective methods
and reducing costs.”
“Work measurement is the application or techniques designed to establish the time for a
qualified worker to carry out a specified job at a defined level or performance.”
There is a close link between method study and work measurement. Method study is
concerned with the reduction of the work content and establishing the one best way of doing
the job whereas work measurement is concerned with investigation and reduction of any
ineffective time associated with the job and establishing time standards for an operation
carried out as per the standard method.

PRODUCTIVITY PRODUCTION AND OPERATIONS MANAGEMENT

Define Productivity in Production and Operation Management

Productivity is the quantitative relation between what we produce and we use as a resource to
produce them, i.e., arithmetic ratio of amount produced (output) to the amount of resources
(input). Productivity can be expressed as:
Productivity =Output&Input

Productivity refers to the efficiency of the production system. It is the concept that guides the
management of production system. It is an indicator to how well the factors of production
(land, capital, labor and energy) are utilized.

European Productivity Agency (EPA) has defined productivity as, “Productivity is an attitude of
mind. It is the mentality of progress, of the constant improvements of that which exists. It is the
certainty of being able to do better today than yesterday and continuously. It is the constant
adaptation of economic and social life to changing conditions. It is the continual effort to apply
new techniques and methods. It is the faith in progress.”
A major problem with productivity is that it means many things to many people. Economists
determine it from Gross National Product (GNP), managers view it as cost cutting and speed up,

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Newton’s Engineering College,MAcherla
 engineers think of it in terms of more output per hour. But generally accepted meaning is that it
is the relationship between goods and services produced and the resources employed in their
production.

Factors Influencing Productivity

Factors influencing productivity can be classified broadly into two categories:
A. controllable (or internal) factors and
B. un-controllable (or external) factors.
A. CONTROLLABLE FOR INTERNAL FACTORS

1. Product factor: In terms of productivity means the extent to which the product meets
output requirements product is judged by its usefulness. The cost benefit factor of a
product can be enhanced by increasing the benefit at the same cost or by reducing cost
for the same benefit.
2. Plant and equipment: These play a prominent role in enhancing the productivity. The
increased availability of the plant through proper maintenance and reduction of idle time
increases the productivity. Productivity can be increased by paying proper attention to
utilization, age, modernization, cost, investments etc.
Factors influencing productivity

3. Technology: Innovative and latest technology improves productivity to a greater extent.

Automation and information technology helps to achieve improvements in material

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 handling, storage, communication system and quality control. The various aspects of
technology factors to be considered are:

i. Size and capacity of the plant,

ii. Timely supply and quality of inputs,
iii. Production planning and control,
iv. Repairs and maintenance,
v. Waste reduction, and
vi. Efficient material handling system.
4. Material and energy:

Efforts to reduce materials and energy consumption brings about considerable

improvement in productivity.
1. Selection of quality material and right material.
2. Control of wastage and scrap.
3. Effective stock control.
4. Development of sources of supply.
5. Optimum energy utilization and energy savings.
6. Human factors:
Productivity is basically dependent upon human competence and skill. Ability to work
effectively is governed by various factors such as education, training, experience
aptitude etc., of the employees. Motivation of employees will influence productivity.
7. Work methods: Improving the ways in which the work is done (methods) improves
productivity, work study and industrial engineering techniques and training are the
areas which improve the work methods, which in term enhance the productivity.
8. Management style: This influence the organizational design, communication in
organization, policy and procedures. A flexible and dynamic management style is a
better approach to achieve higher productivity.

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 UNCONTROLLABLE (OR) EXTERNAL FACTORS

Structural adjustments: Structural adjustments include both economic and social

changes. Economic changes that influence significantly are:

. Shift in employment from agriculture to manufacturing industry,

a. Import of technology, and
b. Industrial competitiveness.
Social changes such as women’s participation in the labor force, education, cultural
values, attitudes are some of the factors that play a significant role in the improvement of
productivity.

Natural resources: Manpower, land and raw materials are vital to the productivity
improvement.
Government and infrastructure: Government policies and program are significant to
productivity practices of government agencies, transport and communication power,
fiscal policies (interest rates, taxes) influence productivity to the greater extent.
Total Productivity Measure (TPM)
It is based on all the inputs. The model can be applied to any manufacturing organization or
service company.
Total productivity =Total tangible output +Total trangible input

Total tangible output = Value of finished goods produced + Value of partialunits produced +
Dividents from securities + Interest+ Other income

Total tangible input = Value of (human + material + capital + energy+ other inputs) used. The
word tangible here refers to measurable.

The output of the firm as well as the inputs must be expressed in a common measurement unit.
The best way is to express them in rupee value.

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 Partial Productivity Measures (PPM)

Depending upon the individual input partial productivity measures are expressed as:
Partial productivity =Total output%Individual input

Labor productivity =Total output%Labour input(in terms of man hours)

Capital productivity =Total output%Capital input

Material productivity =Total output%Material input

Energy productivity =Total output%Energy input

One of the major disadvantages of partial productivity measures is that there is an over
emphasis on one input factor to the extent that other input are underestimated or even
ignored.

Productivity Improvement Techniques

A. TECHNOLOGY BASED
1. Computer Aided Design (CAD), Computer Aided Manufacturing (CAM), and Computer
Integrated Manufacturing Systems (CIMS): CAD refers to design of products, processes
or systems with the help of computers. The impact of CAD on human productivity is
significant for the advantages of CAD are:

a. Speed of evaluation of alternative designs,

b. Minimization of risk of functioning, and
c. Error reduction.

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 CAM is very much useful to design and control the manufacturing. It helps to achieve the
effectiveness in production system by line balancing.

d. Production Planning and Control

e. Capacity Requirements Planning (CRP), Manufacturing Resources Planning (MRP II)
and Materials Requirement Planning (MRP)
f. Automated Inspection.
2. Computer integrated manufacturing:
Computer integrated manufacturing is characterized by automatic line balancing,
machine loading (scheduling and sequencing), automatic inventory control and
inspection.

1. Robotics
2. Laser technology
3. Modern maintenance techniques
4. Energy technology
5. Flexible Manufacturing System (FMS)
EMPLOYEE BASED

Financial and non-financial incentives at individual and group level.

Employee promotion.
Job design, job enlargement, job enrichment and job rotation.
Worker participation in decision-making
Quality Circles (QC), Small Group Activities (SGA)
Personal development.
ATERAL BASED

Material planning and control

Purchasing, logistics
Material storage and retrieval

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 Source selection and procurement of quality material
Waste elimination.
PROCESS BASED
Methods engineering and work simplification
Job design evaluation, job safety
Human factors engineering.
PRODUCT BASED
Value analysis and value engineering
Product diversification
Standardization and simplification
Reliability engineering
Product mix and promotion.
TASK BASED
Management style
Communication in the organization
Work culture
Motivation
Promotion group activity.
ILLUSTRATION 1:
A company produces 160 kg of plastic moulded parts of acceptable quality by consuming 200 kg
of raw materials for a particular period. For the next period, the output is doubled (320 kg) by
consuming 420 kg of raw material and for a third period, the output is increased to 400 kg by
consuming 400 kg of raw material.
SOLUTION:
During the first year, production is 160 kg
Productivity =Output%Input=160%200=0.8 0r 80%

For the second year, production is increased by 100%

Productivity =Output%Input=320%420=0.76 or 76%

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For the third period, production is increased by 150%

Productivity =Output%Input=400%400=1.0 i.e., 100%↑

From the above illustration it is clear that, for second period, though production has doubled,
productivity has decreased from 80% to 76% for period third, production is increased by 150%
and correspondingly productivity increased from 80% to 100%.

ILLUSTRATION 2:
The following information regarding the output produced and inputs consumed for a particular
time period for a particular company is given below:

The values are in terms of base year rupee value. Compute various productivity indices.
SOLUTION:
Partial productivity
Labor productivity =output%Human input=10,000%3,000=3.33

Capital productivity =output%Capital input=10,000%3,000=3.33

Material productivity =output%Material input=10,000%2,000=5.00

Energy productivity =output%Energy input=10,000%1,000=10.00

Other misc. expenses =output%Other misc. input=10,000%500=20.00

Total productivity =Total output%Total input=Total output(Human + Material + Capital + Energy

+ Other misc. input)=10,000%3, 000 + 2, 000 + 3, 000 + 1,000 +500=10,000%9,500=1.053
Total factor productivity (TFP) =Net output%( Labor +Capital) Input=Total output - Material and
services purchased%(Labor + Capital) Input

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 Assume that the company purchases all its material and services including energy, misc. and
equipment (leasing). Then,

Total factor productivity =10,000 - (2000+3000+1000+500)%3000+3000=3500%6000=0.583

WORK STUDY PRODUCTION AND OPERATIONS MANAGEMENT

Work study in Production and Operation Management

“Work study is a generic term for those techniques, method study and work measurement
which are used in the examination of human work in all its contexts. And which lead
systematically to the investigation of all the factors which affect the efficiency and economy of
the situation being reviewed, in order to effect improvement.”
Framework of work study

Work Study in Management Science

Work study is a means of enhancing the production efficiency (productivity) of the firm by
elimination of waste and unnecessary operations. It is a technique to identify non-value adding
operations by investigation of all the factors affecting the job. It is the only accurate and
systematic procedure oriented technique to establish time standards. It is going to contribute
to the profit as the savings will start immediately and continue throughout the life of the
product. Method study and work measurement is part of work study. Part of method study is
motion study, work measurement is also called by the name ‘Time study’.

Advantages of Work Study

Following are the advantages of work study:
1. It helps to achieve the smooth production flow with minimum interruptions.
2. It helps to reduce the cost of the product by eliminating waste and unnecessary operations.
3. Better worker-management relations.
4. Meets the delivery commitment.
5. Reduction in rejections and scrap and higher utilization of resources of the organization.
6. Helps to achieve better working conditions.

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7. Better workplace layout.
8. Improves upon the existing process or methods and helps in standardization and
simplification.
9. Helps to establish the standard time for an operation or job which has got application in
manpower planning, production planning.

METHOD STUDY PRODUCTION AND OPERATIONS MANAGEMENT

Method study in Production and Operation Management

Method study enables the industrial engineer to subject each operation to systematic analysis.
The main purpose of method study is to eliminate the unnecessary operations and to achieve
the best method of performing the operation. Method study is also called methods engineering
or work design.
Method engineering is used to describe collection of analysis techniques which focus on
improving the effectiveness of men and machines. According to British Standards Institution (BS
3138): “Method study is the systematic recording and critical examination or existing and
proposed ways or doing work as a means or developing and applying easier and more effective
methods and reducing cost.”
Fundamentally method study involves the breakdown of an operation or procedure into its
component elements and their systematic analysis. In carrying out the method study, the right
attitude of mind is important. The method study man should have:

1. The desire and determination to produce results.

2. Ability to achieve results.
3. An understanding of the human factors involved.
Method study scope lies in improving work methods through process and operation analysis,
such as:

1. Manufacturing operations and their sequence.

2. Workmen.

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3. Materials, tools and gauges.
4. Layout of physical facilities and work station design.
5. Movement of men and material handling.
6. Work environment.
Objectives of Method Study
Method study is essentially concerned with finding better ways of doing things. It adds value
and increases the efficiency by eliminating unnecessary operations, avoidable delays and other
forms of waste. The improvement in efficiency is achieved through:
1. Improved layout and design of workplace.
2. Improved and efficient work procedures.
3. Effective utilization of men, machines and materials.
4. Improved design or specification of the final product.
The objectives of method study techniques are:

1. Present and analyze true facts concerning the situation.

2. To examine those facts critically.
3. To develop the best answer possible under given circumstances based on critical
examination of facts.
Scope of Method Study
The scope of method study is not restricted to only manufacturing industries. Method study
techniques can be applied effectively in service sector as well. It can be applied in offices,
hospitals, banks and other service organizations. The areas to which method study can be
applied successfully in manufacturing are:
1. To improve work methods and procedures.
2. To determine the best sequence of doing work.
3. To smoothen material flow with minimum of back tracking and to improve layout.
4. To improve the working conditions and hence to improve labor efficiency.
5. To reduce monotony in the work.
6. To improve plant utilization and material utilization.
7. Elimination of waste and unproductive operations.

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Newton’s Engineering College,MAcherla
8. To reduce the manufacturing costs through reducing cycle time of operations.
Steps or Procedure Involved in Methods Study
The basic approach to method study consists of the following eight steps. The detailed
procedure for conducting the method study is shown in the following figure.
1. SELECT the work to be studied and define its boundaries.
2. RECORD the relevant facts about the job by direct observation and collect such additional
data as may be needed from appropriate sources.
3. EXAMINE the way the job is being performed and challenge its purpose, place sequence and
method of performance.
Method study procedure

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Newton’s Engineering College,MAcherla
4. DEVELOP the most practical, economic and effective method, drawing on the contributions
of those concerned.
5. EVALUATE different alternatives to developing a new improved method comparing the cost-
effectiveness of the selected new method with the current method with the current method
of performance.
6. DEFINE the new method, as a result, in a clear manner and present it to those
concerned, i.e., management, supervisors and workers.
7. INSTALL the new method as a standard practice and train the persons involved in applying it.
8. MAINTAIN the new method and introduce control procedures to prevent a drifting back to
the previous method of work.
Note:
Only the first two steps have been dealt in detail.
Selection of the Job for Method Study
Cost is the main criteria for selection of a job, process and department for methods analysis. To
carry out the method study, a job is selected such that the proposed method achieves one or
more of the following results:
a. Improvement in quality with lesser scrap.
b. Increased production through better utilization of resources.
c. Elimination of unnecessary operations and movements.
d. Improved layout leading to smooth flow of material and a balanced production line.
e. Improved working conditions.
CONSIDERATIONS FOR SELECTION OF METHOD STUDY
The job should be selected for the method study based upon the following considerations:
1. Economic aspect
2. Technical aspect, and
3. Human aspect.
A. Economic Aspects

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Newton’s Engineering College,MAcherla
 The method study involves cost and time. If sufficient returns are not attained, the whole
exercise will go waste. Thus, the money spent should be justified by the savings from it. The
following guidelines can be used for selecting a job:
a. Bottleneck operations which are holding up other production operations.
b. Operations involving excessive labor.
c. Operations producing lot of scrap or defectives.
d. Operations having poor utilization of resources.
e. Backtracking of materials and excessive movement of materials.
B. Technical Aspects
The method study man should be careful enough to select a job in which he has the
technical knowledge and expertise. A person selecting a job in his area of expertise is going
to do full justice.
Other factors which favor selection in technical aspect are:

1. Job having in consistent quality.

2. Operations generating lot of scraps.
3. Frequent complaints from workers regarding the job.
Human Considerations
Method study means a change as it is going to affect the way in which the job is done
presently and is not fully accepted by workman and the union. Human considerations play a
vital role in method study. These are some of the situations where human aspect should be
given due importance:
0. Workers complaining about unnecessary and tiring work.
1. More frequency of accidents.
2. Inconsistent earning.
Recording Techniques for Method Study
The next step in basic procedure, after selecting the work to be studied is to record all facts
relating to the existing method. In order that the activities selected for investigation may be
visualized in their entirety and in order to improve them through subsequent critical
examination, it is essential to have some means of placing on record all the necessary facts

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 about the existing method. Records are very much useful to make before and after comparison
to assess the effectiveness of the proposed improved method.
The recording techniques are designed to simplify and standardize the recording work. For this
purpose charts and diagrams are used.

Method Study techniques

The method study techniques are explained below

Recording techniques for method study

CHARTS USED IN METHODS STUDY

This is the most popular method of recording the facts. The activities comprising the jobs are
recorded using method study symbols. A great care is to be taken in preparing the charts so
that the information it shows is easily understood and recognized. The following information
should be given in the chart. These charts are used to measure the movement of operator or
work (i.e., in motion study).
a. Adequate description of the activities.
b. Whether the charting is for present or proposed method.
c. Specific reference to when the activities will begin and end.

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d. Time and distance scales used wherever necessary.
e. The date of charting and the name of the person who does charting.
Types of Charts
It can be broadly divided into (A) Macro motion charts and (B) Micro motion charts. Macro
motion charts are used for macro motion study and micro motion charts are used for micro
motion study. Macro motion study is one which can be measured through ‘stop watch’ and
micro motion study is one which cannot be measured through stop watch.
MACRO MOTION CHARTS
Following four charts are used under this type:
1. Operation Process Chart
It is also called outline process chart. An operation process chart gives the bird’s eye view of
the whole process by recording only the major activities and inspections involved in the
process. Operation process chart uses only two symbols, i.e., operation and inspection.
Operation, process chart is helpful to:
a. Visualize the complete sequence of the operations and inspections in the process.
b. Know where the operation selected for detailed study fits into the entire process.
c. In operation process chart, the graphic representation of the points at which materials
are introduced into the process and what operations and inspections are carried on them
are shown.
2. Flow Process Chart
Flow process chart gives the sequence of flow of work of a product or any part of it through
the work centre or the department recording the events using appropriate symbols. It is the
amplification of the operation process chart in which operations; inspection, storage, delay
and transportation are represented. However, process charts are of three types:

a. Material type— which shows the events that occur to the materials.
b. Man type—Activities performed by the man.
c. Equipment type— how equipment is used.
The flow process chart is useful:

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Newton’s Engineering College,MAcherla
 d. To reduce the distance travelled by men (or materials).
e. To avoid waiting time and unnecessary delays.
f. To reduce the cycle time by combining or eliminating operations.
g. To fix up the sequence of operations.
h. To relocate the inspection stages.
Like operation process chart, flow process chart is constructed by placing symbols one
below another as per the occurrence of the activities and are joined by a vertical line. A
brief description of the activity is written on the right hand side of the activity symbol and
time or distance is given on the left hand side.

3. Two Handed Process Chart

A two handed (operator process chart) is the most detailed type of flow chart in which the
activities of the workers hands are recorded in relation to one another. The two handed
process chart is normally confined to work carried out at a single workplace. This also gives
synchronized and graphical representation of the sequence of manual activities of the
worker. The application of this charts are:
 To visualize the complete sequence of activities in a repetitive task.
 To study the work station layout.
Multiple Activity Chart
It is a chart where activities of more than subject (worker or equipment) are each recorded
on a common time scale to show their inter-relationship. Multiple activity chart is made:
 to study idle time of the man and machines,
 to determine number of machines handled by one operator, and
 to determine number of operators required in teamwork to perform the given job.
Diagrams Used in Method Study
The flow process chart shows the sequence and nature of movement but it does not clearly
show the path of movements. In the paths of movements, there are often undesirable features
such as congestion, back tracking and unnecessary long movements. To record these
unnecessary features, representation of the working area in the form of flow diagrams, string
diagrams can be made:

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1. To study the different layout plans and thereby; select the most optimal layout.
2. To study traffic and frequency over different routes of the plant.
3. Identification of back tracking and obstacles during movements.
Diagrams are of two types:

1. Flow diagram and

2. String diagram.
1. FLOW DIAGRAM
Flow diagram is a drawing, of the working area, showing the location of the various activities
identified by their numbered symbols and are associated with particular flow process chart
either man type or machine type.The routes followed in transport are shown by joining the
symbols in sequence by a line which represents as nearly as possible the path or movement
of the subject concerned. Following are the procedures to make the flow diagram:

1. The layout of the workplace is drawn to scale.

2. Relative positions of the machine tools, work benches, storage, and inspection benches
are marked on the scale.
3. Path followed by the subject under study is tracked by drawing lines.
4. Each movement is serially numbered and indicated by arrow for direction.
5. Different colors are used to denote different types of movements.
2. STRING DIAGRAM
The string diagram is a scale layout drawing on which, length of a string is used to record the
extent as well as the pattern of movement of a worker working within a limited area during
a certain period of time. The primary function of a string diagram is to produce a record of a
existing set of conditions so that the job of seeing what is actually taking place is made as
simple as possible.
One of the most valuable features of the string diagram is the actual distance travelled
during the period of study to be calculated by relating the length of the thread used to the
scale of drawing. Thus, it helps to make a very effective comparison between different
layouts or methods of doing job in terms of the travelling involved. The main advantages of

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 string diagram compared to flow diagram is that respective movements between work
stations which are difficult to be traced on the flow diagram can be conveniently shown on
string diagram.

Following are the procedures to draw string diagram:

1. A layout of the work place of factory is drawn to scale on the soft board.
2. Pins are fixed into boards to mark the locations of work stations, pins are also driven at
the turning points of the routes.
3. A measured length of the thread is taken to trace the movements (path).
4. The distance covered by the object is obtained by measuring the remaining part of the
thread and subtracting it from original length.
Symbols Used in Method Study
Graphical method of recording was originated by Gilberth, in order to make the presentation of
the facts clearly without any ambiguity and to enable to grasp them quickly and clearly. It is
useful to use symbols instead of written description.
METHOD STUDY SYMBOLS

Operation
An operation occurs when an object is intentionally changed in one or more of its
characteristics (physical or chemical). This indicates the main steps in a process, method or
procedure.
An operation always takes the object one stage ahead towards completion.
Examples of operation are:
 Turning, drilling, milling, etc.
 A chemical reaction.
 Welding, brazing and riveting.

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 Lifting, loading, unloading.
 Getting instructions from supervisor.
Inspection
An inspection occurs when an object is examined and compared with standard for quality and
quantity. The inspection examples are:
 Visual observations for finish.
 Count of quantity of incoming material.
 Checking the dimensions.
Transportation
A transport indicates the movement of workers, materials or equipment from one place to
another.
Example:
Movement of materials from one work station to another.
Workers travelling to bring tools.
Delay D: Delay (Temporary Storage)
A delay occurs when the immediate performance of the next planned thing does not take
place.
Example:
 Work waiting between consecutive operations.
 Workers waiting at tool cribs.
 Operators waiting for instructions from supervisor.
Storage
Storage occurs when the object is kept in an authorized custody and is protected against
unauthorized removal. For example, materials kept in stores to be distributed to various work.
ILLUSTRATION1. Develop a Process Chart for making a cheese sandwich.
SOLUTION. The following chart is one possible solution. The level of detail in process charts
depends upon the requirements of the job. Time is often included to aid analysis of value
added.

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ProcessChart
Distance in Symbol Process description meter

ILLUSTRATION 2.
Develop a Multiple Activity Chart for doing three loads of laundry, assume you will have access
to one washing machine and one dryer.
SOLUTION:
The following chart is one possible solution. The level of detail in process charts depends upon
the requirements of the job. Time is often included to aid analysis of value added.

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 MICRO-MOTION STUDY CHART
Micro-motion study provides a technique for recording and timing an activity. It is a set of
techniques intended to divide the human activities in a groups of movements or micro-motions
(called Therbligs) and the study of such movements helps to find for an operator one best
pattern
of movements that consumes less time and requires less effort to accomplish the task.
Therbligs were suggested by Frank O. Gilbreth, the founder of motion study. Micro-motion
study was mainly employed for the job analysis. Its other applications include:
1. As an aid in studying the activities of two or more persons on a group work?
2. As an aid in studying the relationship of the activities of the operator and the machine as a
means of timing operations.
3. As an aid in obtaining motion time data for time standards.
4. Acts as permanent record of the method and time of activities of the operator and the
machine.
SIMO chart symbols

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 The micro-motion group of techniques is based on the idea of dividing human activities into
division of movements or groups of movements (Therbligs) according to purpose for which they
are made. Gilbreth differentiated 17 fundamental hand or hand and eye motions. Each
Therbligs has a specific color, symbol and letter for recording purposes. The Therbligs are
micro-motion study involves the following steps:

1. Filming the operation to be studied.

2. Analysis of the data from the film.
The recording of the data through SIMO chart is done as micro motion chart.
SIMO Chart
Simultaneous motion cycle chart (SIMO chart) is a recording technique for micro-motion study.
A SIMO chart is a chart based on the film analysis, used to record simultaneously on a common
time scale the Therbligs or a group of Therbligs performed by different parts of the body of one
or more operators.

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Newton’s Engineering College,MAcherla
 It is the micro-motion form of the man type flow process chart. To prepare SIMO chart, an
elaborate procedure and use of expensive equipment are required and this study is justified
when the saving resulting from study will be very high.

MOTION STUDY IN PRODUCTION AND OPERATIONS MANAGEMENT

Motion study in Production Management

Motion study is part of method study where analysis of the motion of an operator or work will
be studied by following the prescribed methods.

Principles of Motion study

There are a number of principles concerning the economy of movements which have been
developed as a result of experience and which forms the basis for the development of
improved methods at the workplace. These are first used by Frank Gilbreth, the founder of
motion study and further rearranged and amplified by Barnes, Maynard and others. The
principles are grouped into three headings:
A. Use of the human body.
B. Arrangement of workplace.
C. Design of tools and equipment.
USES OF HUMAN BODY
When possible:
1. The two hands should begin and complete their movements at the same time.
2. The two hands should not be idle at the same time except during periods of rest.
3. Motions of the arms should be made simultaneously.
4. Hand and body motions should be made at the lowest classification at which it is possible to
do the work satisfactorily.
5. Momentum should be employed to help the worker, but should be reduced to a minimum
whenever it has to be overcome by muscular effort.
6. Continuous curved movements are to be preferred to straight line motions involving sudden
and changes in directions.

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7. ‘Ballistic’ (i.e., free swinging) movements are faster, easier and more accurate than
restricted or controlled movements.
8. Rhythm is essential to the smooth and automatic performance of a repetitive operation. The
work should be arranged to permit easy and natural rhythm wherever possible.
9. Work should be arranged so that eye movements are confined to a comfortable area,
without the need for frequent changes of focus.
ARRANGEMENT OF THE WORKPLACE
1. Definite and fixed stations should be provided for all tools and materials to permit habit
formation.
2. Tools and materials should be pre-positioned to reduce searching.
3. Gravity fed, bins and containers should be used to deliver the materials as close to the point
of use as possible.
4. Tools, materials and controls should be located within a maximum working area and as near
to the worker as possible.
5. Materials and tools should be arranged to permit the best sequence of motions.
6. ‘Drop deliveries’ or ejectors should be used wherever possible, so that the operative does
not have to use his hands to dispose of finished parts.
7. Provision should be made for adequate lightning, and a chair of type and height to permit
good posture should be provided. The height of the workplace and seat should be arranged
to allow alternate standing and seating.
DESIGN OF TOOLS AND EQUIPMENTS
1. The color of the workplace should contrast with that of work and thus reduce eye fatigue.
2. The hands should be relieved of all work of ‘holding’ the work piece where this can be done
by a jig or fixture or foot operated device.
3. Two or more tools should be combined where possible.
4. Where each finger performs some specific movement, as in typewriting, the load should be
distributed in accordance with the inherent capacities of the fingers.
5. Handles such as those used on screw drivers and cranks should be designed to permit
maximum surface of the hand to come in contact with the handle.

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6. Levers, cross bars and wheel bars should be in such position that operator can manipulate
them with least body change and with greatest mechanical advantage.
Recording Techniques of Motion Study
Most of the techniques mentioned in method study is used in the motion study. They are as
follows:
Macro Motion Study
a. Flow process chart
b. Two handed process chart.
Micro Motion Study
SIMO chart.
WORK MEASUREMENT PRODUCTION AND OPERATIONS MANAGEMENT

Work measurement is also called by the name ‘time study’. Work measurement is absolutely
essential for both the planning and control of operations. Without measurement data, we
cannot determine the capacity of facilities or it is not possible to quote delivery dates or costs.
We are not in a position to determine the rate of production and also labor utilization and
efficiency. It may not be possible to introduce incentive schemes and standard costs for budget
control.

Objectives of Work Measurement

The use of work measurement as a basis for incentives is only a small part of its total
application. The objectives of work measurement are to provide a sound basis for:
1. Comparing alternative methods.
2. Assessing the correct initial manning (manpower requirement planning).
3. Planning and control.
4. Realistic costing.
5. Financial incentive schemes.
6. Delivery date of goods.
7. Cost reduction and cost control.
8. Identifying substandard workers.
9. Training new employees.

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 Techniques of Work measurement in Production Management
For the purpose of work measurement, work can be regarded as:

1. Repetitive work: The type of work in which the main operation or group of operations
repeat continuously during the time spent at the job. These apply to work cycles of
extremely short duration.
2. Non-repetitive work: It includes some type of maintenance and construction work, where
the work cycle itself is hardly ever repeated identically.
Various techniques of work measurement are:

1. Time study (stop watch technique),

2. Synthesis,
3. Work sampling,
4. Predetermined motion and time study,
5. Analytical estimating.
Time study and work sampling involve direct observation and the remaining are data based and
analytical in nature.

1. Time study: A work measurement technique for recording the times and rates of working for
the elements of a specified job carried out under specified conditions and for analyzing the
data so as to determine the time necessary for carrying out the job at the defined level of
performance. In other words measuring the time through stop watch is called time study.
2. Synthetic data:
A work measurement technique for building up the time for a job or pans of the job at a
defined level of performance by totaling element times obtained previously from time
studies on other jobs containing the elements concerned or from synthetic data.
3. Work sampling:
A technique in which a large number of observations are made over a period of time of one
or group of machines, processes or workers. Each observation records what is happening at
that instant and the percentage of observations recorded for a particular activity, or delay, is
a measure of the percentage of time during which that activities delay occurs.

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4. Predetermined motion time study (PMTS):
A work measurement technique whereby times established for basic human motions
(classified according to the nature of the motion and conditions under which it is made) are
used to build up the time for a job at the defined level of performance. The most commonly
used PMTS is known as Methods Time Measurement (MTM).
5. Analytical estimating:
A work measurement technique, being a development of estimating, whereby the time
required to carry out elements of a job at a defined level of performance is estimated partly
from knowledge and practical experience of the elements concerned and partly from
synthetic data. The work measurement techniques and their applications are shown in the
following table.

Work Measurement techniques in Operations Management

Work measurement techniques and their application

TIME STUDY PRODUCTION AND OPERATIONS MANAGEMENT

Time study in Production and Operation Management

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 Time study is also called work measurement. It is essential for both planning and control of
operations. According to British Standard Institute time study has been defined as “The
application of techniques designed to establish the time for a qualified worker to carry out a
specified job at a defined level of performance.”

Steps in Making Time Study

Stop watch time is the basic technique for determining accurate time standards. They are
economical for repetitive type of work. Steps in taking the time study are:
1. Select the work to be studied.
2. Obtain and record all the information available about the job, the operator and the working
conditions likely to affect the time study work.
3. Breakdown the operation into elements. An element is a instinct part of a specified activity
composed of one or more fundamental motions selected for convenience of observation
and timing.
4. Measure the time by means of a stop watch taken by the operator to perform each element
of the operation. Either continuous method or snap back method of timing could be used.
5. At the same time, assess the operators effective speed of work relative to the observer’s
concept of ‘normal’ speed. This is called performance rating
6. Adjust the observed time by rating factor to obtain normal time for each element
Normal =
Observed time Rating
100
7. Add the suitable allowances to compensate for fatigue, personal needs, contingencies etc. to
give standard time for each element.
8. Compute allowed time for the entire job by adding elemental standard times considering
frequency of occurrence of each element.
9. Make a detailed job description describing the method for which the standard time is
established.

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10. Test and review standards wherever necessary. The basic steps in time study are
represented by a block diagram in the figure “Steps in time study”
Computation of Standard Time
Standard time is the time allowed to an operator to carry out the specified task under specified
conditions and defined level of performance. The various allowances are added to the normal
time as applicable to get the standard time “Components standard time”.

Standard time Calculation time study

Standard time may be defined as the, amount of time required to complete a unit of work: (a)
under existing working conditions, (b) using the specified method and machinery, (c) by an
operator, able to the work in a proper manner, and (d) at a standard pace.
Thus basic constituents of standard time are:

1. Elemental (observed time).

2. Performance rating to compensate for difference in pace of working.
3. Relaxation allowance.
4. Interference and contingency allowance.
5. Policy allowance.
Steps in time study

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Components standard time

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 Allowances
The normal time for an operation does not contain any allowances for the worker. It is
impossible to work throughout the day even though the most practicable, effective method has
been developed.
Even under the best working method situation, the job will still demand the expenditure of
human effort and some allowance must therefore be made for recovery from fatigue and for
relaxation. Allowances must also be made to enable the worker to attend to his personal needs.
The allowances are categorized as:

1. Relaxation allowance,
2. Interference allowance, and
3. Contingency allowance.
RELAXATION ALLOWANCE
Relaxation allowances are calculated so as to allow the worker to recover from fatigue.
Relaxation allowance is a addition to the basic time intended to provide the worker with the
opportunity to recover from the physiological and psychological effects of carrying out specified
work under specified conditions and to allow attention to personal needs. The amount of
allowance will depend on nature of the job.
Relaxation allowances are of two types: fixed allowances and variable allowances.
Fixed allowances constitute:
a. Personal needs allowance:
b. It is intended to compensate the operator for the time necessary to leave, the workplace to
attend to personal needs like drinking water, smoking, washing hands. Women require

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Newton’s Engineering College,MAcherla
 longer personal allowance than men. A fair personal allowance is 5% for men, and 7% for
women.
c. Allowances for basic fatigue:
d. This allowance is given to compensate for energy expended during working. A common
figure considered as allowance is 4% of the basic time.
VARIABLE ALLOWANCE
Variable allowance is allowed to an operator who is working under poor environmental
conditions that cannot be improved, added stress and strain in performing the job. The variable
fatigue allowance is added to the fixed allowance to an operator who is engaged on medium
and heavy work and working under abnormal conditions. The amount of variable fatigue
allowance varies from organization to organization.
INTERFERENCE ALLOWANCE
It is an allowance of time included into the work content of the job to compensate the operator
for the unavoidable loss of production due to simultaneous stoppage of two or more machines
being operated by him. This allowance is applicable for machine or process controlled jobs.
Interference allowance varies in proportion to number of machines assigned to the operator.
The interference of the machine increases the work content.
CONTINGENCY ALLOWANCE
A contingency allowance is a small allowance of time which may be included in a standard time
to meet legitimate and expected items of work or delays. The precise measurement of which is
uneconomical because of their infrequent or irregular occurrence.
This allowance provides for small unavoidable delays as well as for occasional minor extra work:
Some of the examples calling for contingency allowance are:

 Tool breakage involving removal of tool from the holder and all other activities to insert new
tool into the tool holder.
 Power failures of small duration.
 Obtaining the necessary tools and gauges from central tool store. Contingency allowance
should not exceed 5%.

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POLICY ALLOWANCE
Policy allowances are not the genuine part of the time study and should be used with utmost
care and only in clearly defined circumstances.The usual reason for making the policy allowance
is to line up standard times with requirements of wage agreement between employers and
trade unions.
The policy allowance is an increment, other than bonus increment, applied to a standard time
(or to some constituent part of it, e.g., work content) to provide a satisfactory level of earnings
for a specified level of performance under exceptional circumstances. Policy allowances are
sometimes made as imperfect functioning of a division or part of a plant.
ILLUSTRATION 1: Assuming that the total observed time for an operation of assembling an
electric switch is 1.00 min. If the rating is 120%, find normal time. If an allowance of 10% is
allowed for the operation, determine the standard time.

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 Ch. Sumathi Devi
Newton’s Engineering College,MAcherla
 UNIT 3

Managing of Work Environment

Automation:

AUTOMATION INTRODUCTION

Automation is a technology concerned with the application of mechanical, electronic, and

computer- based systems to operate and control production. This technology includes
automatic machine tools to process parts, automatic assembly machines, industrial robots,
automatic material handling and storage systems, automatic inspection systems for quality
control, feedback control and computer process control, computer systems for planning, data
collection and decision-making to support manufacturing activities.

TYPES OF AUTOMATION

Types of Automation System with examples

Automated production systems can be classified into three basic types:

1. Fixed automation,
2. Programmable automation, and
3. Flexible automation.

Fixed Automation examples

FIXED AUTOMATION
It is a system in which the sequence of processing (or assembly) operations is fixed by the
equipment configuration. The operations in the sequence are usually simple. It is the
integration and coordination of many such operations into one piece of equipment that makes
the system complex. The typical features of fixed automation are:
a. High initial investment for custom–Engineered equipment;

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b. High production rates; and
c. Relatively inflexible in accommodating product changes.
The economic justification for fixed automation is found in products with very high demand
rates and volumes. The high initial cost of the equipment can be spread over a very large
number of units, thus making the unit cost attractive compared to alternative methods of
production. Examples of fixed automation include mechanized assembly and machining
transfer lines.

PROGRAMMABLE AUTOMATION
In this the production equipment is designed with the capability to change the sequence of
operations to accommodate different product configurations. The operation sequence is
controlled by a program, which is a set of instructions coded so that the system can read and
interpret them. New programs can be prepared and entered into the equipment to produce
new products. Some of the features that characterize programmable automation are:
a. High investment in general-purpose equipment;
b. Low production rates relative to fixed automation;
c. Flexibility to deal with changes in product configuration; and
d. Most suitable for batch production.
Automated production systems that are programmable are used in low and medium volume
production. The parts or products are typically made in batches. To produce each new batch of
a different product, the system must be reprogrammed with the set of machine instructions
that correspond to the new product. The physical setup of the machine must also be changed
over: Tools must be loaded, fixtures must be attached to the machine table also be changed
machine settings must be entered. This changeover procedure takes time. Consequently, the
typical cycle for given product includes a period during which the setup and reprogramming
takes place, followed by a period in which the batch is produced. Examples of programmed
automation include numerically controlled machine tools and industrial robots.

FLEXIBLE AUTOMATION
It is an extension of programmable automation. A flexible automated system is one that is
capable of producing a variety of products (or parts) with virtually no time lost for changeovers

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 from one product to the next. There is no production time lost while reprogramming the
system and altering the physical setup (tooling, fixtures, and machine setting). Consequently,
the system can produce various combinations and schedules of products instead of requiring
that they be made in separate batches. The features of flexible automation can be summarized
as follows:
1. High investment for a custom-engineered system.
2. Continuous production of variable mixtures of products.
3. Medium production rates.
4. Flexibility to deal with product design variations.
The essential features that distinguish flexible automation from programmable automation are:

1. the capacity to change part programs with no lost production time; and
2. the capability to changeover the physical setup, again with no lost production time.
These features allow the automated production system to continue production without the
downtime between batches that is characteristic of programmable automation. Changing the
part programs is generally accomplished by preparing the programs off-line on a computer
system and electronically transmitting the programs to the automated production system.
Therefore, the time required to do the programming for the next job does not interrupt
production on the current job. Advances in computer systems technology are largely
responsible for this programming capability in flexible automation. Changing the physical setup
between parts is accomplished by making the changeover off-line and then moving it into place
simultaneously as the next part comes into position for processing. The use of pallet fixtures
that hold the parts and transfer into position at the workplace is one way of implementing this
approach. For these approaches to be successful; the variety of parts that can be made on a
flexible automated production system is usually more limited than a system controlled by
programmable automation.

The relative positions of the three types of automation for different production volumes and
product varieties are depicted in the following figure.

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 Automation in Production system

Types of production automation

Waste Management

WASTE MANAGEMENT INTRODUCTION

The industrial waste and scrap consists of spoiled raw-materials, rejected components,
defective parts, waste from production departments etc. involves some commercial values.
They should be disposed of periodically and proper credit of the amount should be taken in the
books of accounts.

Waste management in Production and Operations Management

waste management places an important role in managing operations. Wastes can be

categorized into obsolete, surplus and scrap items.

1. Obsolete items: These are those materials and equipments which are not damaged and
which have economic worth but which are no longer useful for the Company’s operation
owing to many reason such as, changes in product line, process, materials, and so on.

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2. Surplus items: These are those materials and equipments which have no immediate use but
have accumulated due to faulty planning, forecasting and purchasing. However, they have a
usage value in future.
3. Scrap: It is defined as process wastage, such as, turnings, borings, sprues and flashes. They
may have an end-use within the plant having commercial values. Hence, should be disposed
of periodically
REASONS FOR GENERATION AND ACCUMULATION OF OBSOLETE, SURPLUS AND SCRAP ITEMS
PRODUCTION AND OPERATIONS MANAGEMENT

Following are the reasons for the generation and accumulation of obsolete, surplus and scrap
items:

1. Changes in product design: This may lead to some items getting invalid so far as the final
product is concerned. Hence, the entire stock of such items as surplus obsolete.
2. Rationalization: Sometimes raw materials are renationalized so as to minimize variety and
simplify procurement. The rationalization process renders some items as surplus or
obsolete.
3. Cannibalization: When a machine breakdown occurs, sometimes it is rectified using parts of
an identical machine which is not functioning due to various reasons. This process of
‘cannibalization’ is not uncommon in many project-based industries. When continued
unchecked, this results in obsolete and scrap items.
4. Faulty planning and forecasting: The marketing department may have projected a sales
forecast which might be on the higher side. Any material planning has to be based on sales
forecasts and this could result in surplus items. Wrong indenting by the user departments
also leads to accumulation.
5. Faulty purchase practices: Sub-optimizing decisions like buying in bulk to take care of
discounts and transportation economy without taking into account factors such as, shelf life,
storage space requirements and technological changes once again lead to the accumulation
of surplus and obsolete stocks.
6. Other causes: Many items are held as insurable spares for many years without any
consumption. Faulty store-keeping methods, without adequate preservation, lead to

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 spoilage. Inferior materials handling, improper codification and poor manufacturing
methods also result in obsolete, surplus and scrap items. Poor maintenance of machine tools
may result in excessive tools wear and greater process scrap.

Quality Assurance and Quality Circles

QUALITY CONTROL INTRODUCTION

In any business organization, profit is the ultimate goal. To achieve this, there are several
approaches. Profit may be maximized by cutting costs for the same selling price per unit. If it is
a monopolistic business, without giving much of importance to the cost reduction programs,
the price may be fixed suitably to earn sufficient profit. But, to survive in a competitive business
environment, goods and services produced by a firm should have the minimum required
quality. Extra quality means extra cost. So, the level of quality should be decided in relation to
other factors such that the product is well absorbed in the market. In all these cases, to have
repeated sales and thereby increased sales revenue, basic quality is considered to be one of the
supportive factors.

Quality is a measure of how closely a good or service conforms to specified standard. Quality
standards may be any one or a combination of attributes and variables of the product being
manufactured. The attributes will include performance, reliability, appearance, commitment to
delivery time, etc., variables may be some measurement variables like, length, width, height,
diameter, surface finish, etc.

Most of the above characteristics are related to products. Similarly, some of the quality
characteristics of services are meeting promised due dates, safety, comfort, security, less
waiting time and so forth. So, the various dimensions of quality are performance, features,
reliability, conformance, durability, serviceability, aesthetics, perceived quality, safety, comfort,
security, commitment to due dates, less waiting time, etc.

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QUALITY CIRCLES PRODUCTION AND OPERATIONS MANAGEMENT

(Joseph Moses Juran (December 24, 1904 – February 28, 2008) JAPAN

Quality circle in Operation Management

The quality circles begun in Japan in 1960s. The concept of quality circles is based on the
participating style of management. It assumes that productivity will improve through an uplift
of morale and motivations which are in turn achieved through consultation and discussion in
informal groups. One organizational mechanism for worker participation in quality is the quality
circle. It is typically an informal group of people that consists of operators, supervisors,
managers and so on who get together to improve ways to make the product or deliver the
service.

According to Juran, quality circle defined as “a group of work force level people, usually from
within one department, who volunteer to meet weekly (on company time) to address quality
problems that occur within their department.”

Quality circle members select the problems and are given training is problem-solving
techniques. A quality circle can be an effective productivity improvement tool because it
generates new ideas and implements them. Where the introduction of quality circle is capably
planned and where the company environment is supporting they are highly successful.

The benefits fall into two categories: those are measurable saving and improvement in the
attitudes and behavior of people. Quality circles pursue two types of problems, those
concerned with the personal well being of the worker and those concerned with the well being
of company.

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 Benefits of QC
The most important benefit of quality circles is their effect on people’s attitudes fall into three
categories:
1. Quality Circles Effect on Individual Characteristics

a. Quality circles enable the individual to improve personal capabilities group participation
and learning specific problem-solving tools.
b. Quality circles increase the individual’s self-respect.
c. Quality circles help worker change certain personality characteristics shy person become
as active.
2. Quality Circles Effect on Individuals Relations with Other

a. Quality circles increase the respect of the supervisor for the worker.
b. Quality circles increase workers understanding of the difficulties faced by supervisors
problem selection, solving and implementations.
c. Quality circle increase management’s respect for worker.
3. Quality Circles Effect on Workers and Their Attributes

a. Quality circles change some workers negative attitudes.

b. Quality circle reduces conflict stemming from the working environment.
c. Quality circles help workers to understand better the reasons while many problems
solved quickly.
Quality circles, as a management tool, are based on the following basic principles of people:
d. People want to do a good job.
e. People want to be recognized as intelligent, interested employees and to participate in
decisions affecting their work.

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 f. People want information to better understand goals and problems of their organization
and make informed decisions.
g. Employees want recognition and responsibility and a feeling of self-esteem.
Motivational methods are not enough for successful quality circle programs. Management
support, technical knowledge, and statistical procedures are essential.

STATISTICAL QUALITY CONTROL IN PRODUCTION AND OPERATIONS MANAGEMENT

Statistical process control (SPC) is the application of statistical techniques to determine whether
the output of a process conforms to the product or service design. It aims at achieving good
quality during manufacture or service through prevention rather than detection. It is concerned
with controlling the process that makes the product because if the process is good then the
product will automatically be good.

Control Charts
SPC is implemented through control charts that are used to monitor the output of the process
and indicate the presence of problems requiring further action. Control charts can be used to
monitor processes where output is measured as either variables or attributes. There are two
types of control charts: Variable control chart and attribute control chart.
1. Variable control charts: It is one by which it is possible to measures the quality
characteristics of a product. The variable control charts are X-BAR chart, R-
BAR chart, SIGMA chart.
2. Attribute control chart: It is one in which it is not possible to measures the quality
characteristics of a product, i.e., it is based on visual inspection only like good or bad,
success or failure, accepted or rejected. The attribute control charts are p-charts, np-charts,
c-charts, u-charts. It requires only a count of observations on characteristics e.g., the
number of nonconforming items in a sample.

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 Control charts

CHARACTERISTICS OF CONTROL CHARTS

A control chart is a time-ordered diagram to monitor a quality characteristic, consisting of:
1. A nominal value, or centre line, the average of several past samples.
2. Two control limits used to judge whether action is required, an upper control limit (UCL) and
a lower control limit (LCL).
3. Data points, each consisting of the average measurement calculated from a sample taken
from the process, ordered overtime. By the Central Limit Theorem, regardless of the
distribution of the underlying individual measurements, the distribution of the sample
means will follow a normal distribution. The control limits are set based on the sampling
distribution of the quality measurement.
BENEFITS OF USING CONTROL CHARTS
Following are the benefits of control charts:
1. A control chart indicates when something may be wrong, so that corrective action can be
taken.
2. The patterns of the plot on a control chart diagnosis possible cause and hence indicate
possible remedial actions.
3. It can estimate the process capability of process.
4. It provides useful information regarding actions to take for quality improvement.
OBJECTIVES OF CONTROL CHARTS
Following are the objectives of control charts:

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1. To secure information to be used in establishing or changing specifications or in determining
whether the process can meet specifications or not.
2. To secure information to be used on establishing or changing production procedures.
3. To secure information to be used on establishing or changing inspection procedures or
acceptance procedures or both.
4. To provide a basis for current decision during production.
5. To provide a basis for current decisions on acceptance for rejection of manufacturing or
purchased product.
6. To familiarize personnel with the use of control chart.
CONTROL CHARTS FOR VARIABLES
As the name indicates, these charts will use variable data of a process. X chart given an idea of
the central tendency of the observations. These charts will reveal the variations between
sample observations. R chart gives an idea about the spread (dispersion) of the observations.
This chart shows the variations within the samples.
X-Chart and R-Chart: The formulas used to establish various control limits are as follows:

a. Standard Deviation of the Process, σ, Unknown R-Chart: To calculate the range of the data,
subtract the smallest from the largest measurement in the sample the control limits:

b. Standard Deviation of the Process, σ, Known Control charts for variables (with the standard
deviation of the process, σ, known) monitor the mean, X , of the process distribution. The
control limits are:

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 Procedures to construct X-chart and R-chart

1. Identify the process to be controlled.

2. Select the variable of interest.
3. Decide a suitable sample size (n) and number of samples to be collected (k).
4. Collect the specified number of samples over a given time interval.
5. Find the measurement of interest for each piece within the sample.
6. Obtain mean (X) of each sample.
7. Establish control limits for X and R-charts.
CONTROL CHARTS FOR ATTRIBUTES
P-charts and C-charts are charts will used for attributes. This chart shows the quality
characteristics rather than measurements.
P-CHART
A p-chart is a commonly used control chart for attributes, whereby the quality characteristic is
counted, rather than measured, and the entire item or service can be declared good or
defective. The standard deviation of the proportion defective, p, is:

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ILLUSTRATIONS ON X BAR CHART AND R BAR CHART

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 Ch. Sumathi Devi
Newton’s Engineering College,MAcherla
 Ch. Sumathi Devi
Newton’s Engineering College,MAcherla
 Ch. Sumathi Devi
Newton’s Engineering College,MAcherla
TYPES OF SAMPLING ERRORS
There are two types of errors. They are type-I and type-II that can occur when making
inferences from control chart.
Type-I: Error or a-error or Level of Significance
Reject the hypothesis when it is true. This results from inferring that a process is out of control
when it is actually in control. The probability of type-I error is denoted by a, suppose a process
is in control. If a point on the control chart falls outside the control limits, we assume that, the
process is out of control. However, since the control limits are a finite distance (3s) from the
mean. There is a small chance about 0.0026 of a sample falling outside the control limits. In
such instances, inferring the process is out of control is wrong conclusion. The control limits
could be placed sufficiently far apart say 4 or 5 a stand deviations on each side of the central
lines to reduce the probability of type-I error.
Type-II: Error or ß-error
Accept the hypothesis when it is false. This results from inferring that a process is in control
when it is really out of control. If no observations for outside the control limits we conclude

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 that the process is in control while in reality it is out control. For example, the process mean has
changed.
The process could out of control because process variability has changed (due to presence of
new operator). As the control limits are placed further apart the probability of type-II error
increases. To reduce the probability of type-II error it tends to have the control limits placed
closer to each other. This increases the probability of type-I error. Thus, the two types of errors
are inversely related to each other as the control limits change. Increasing the sample size can
reduce both a and ß.

Acceptance Sampling
The objective of acceptance sampling is to take decision whether to accept or reject a lot based
on sample’s characteristics. The lot may be incoming raw materials or finished parts. An
accurate method to check the quality of lots is to do 100% inspection. But, 100% inspection will
have the following limitations:
 The cost of inspection is high.
 Destructive methods of testing will result in 100% spoilage of the parts.
 Time taken for inspection will be too long.
 When the population is large or infinite, it would be impossible or impracticable to inspect
each unit.
Hence, acceptance-sampling procedure has lot of scope in practical application. Acceptance
sampling can be used for attributes as well as variables.

Acceptance sampling deals with accept or reject situation of the incoming raw materials and
finished goods. Let the size of the incoming lot be N and the size of the sample drawn be n. The
probability of getting a given number of defective goods parts out a sample consisting
of n pieces will follow binomial distribution. If the lot size is infinite or very large, such that
when a sample is drawn from it and not replaced, then the usage of binomial distribution is
justified. Otherwise, we will have to use hyper-geometric distribution.
Specifications of a single sampling plan will contain a sample size (n) and an acceptance number
C. As an example, if we assume the sample size as 50 and the acceptance number as 3, the
interpretation of the plan is explained as follows: Select a sample of size 50 from a lot and

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obtain the number of defective pieces in the sample. If the number of defective pieces is less
than or equal to 3, then accept the whole lot from which the sample is drawn. Otherwise, reject
the whole lot. This is called single sampling plan. There are several variations of this plan.
In this process, one will commit two types of errors, viz., type-I error and type-II error. If the lot
is really good, but based on the sample information, it is rejected, and then the
supplier/producer will be penalized. This is called producer’s risk or type-I error. The notation
for this error is a . On the other hand, if the lot is really bad, but it is accepted based on the
sample information, then the customer will be at loss. This is called consumer’s risk or type-II
error. The notation for this error is ß. So, both parties should jointly decide about the levels of
producer’s risk (a) and consumer’s risk (ß) based on mutual agreement.
OPERATING CHARACTERISTIC CURVE (O.C. CURVE)
The concepts of the two types of risk are well explained using an operating characteristic curve.
This curve will provide a basis for selecting alternate sample plans. For a given value of sample
size (n), acceptance number (C), the O.C. curve.
In the next figure per cent defective is shown on x-axis. The probability of accepting the lot for
given per cent defective is shown on y-axis. The value for per cent defective indicates the
quality level of the lot inspected. AQL means acceptable quality level and LTPD indicates lot
tolerance per cent defectives. These represent quality levels of the lot submitted for inspection.
If the quality level of the lot inspected is at AQL or less than AQL, then the customers are
satisfied with the quality of the lot. The corresponding probability of acceptance is called 1 –a.
On the other hand, if the quality level is more than or equal to LTPD, the quality of the lot is
considered to be inferior from consumer’s viewpoint. The corresponding probability of
acceptance of the lot is called ß. The quality leveling between AQL and LTPD is called indifferent
zone.

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 Operating characteristic curve

So, we require α, ß, AQL and LTPD to design a sample plan. Based on these, one can determine
n and C for the implementation purpose of the plan. A various O.C. curves for different
combinations of N and C shown here.
Operation characteristic curve for different samples.

SINGLE SAMPLING PLAN

The design of single sampling plan with a specified producer’s risk and consumer’s risk is
demonstrated in this section. The required data for designing such plan are as follows:
a. Producer’s Risk (α)
b. Consumer’s Risk (ß)

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c. Acceptable Quality Level (AQL)
d. Lot Tolerance Per cent Defectives (LPTD)
The objective of this design is to find out the values for the sample size (n) and acceptance
number (C). The values for n and C are to be selected such that the O.C. curve passes through
the following two coordinates:
 Coordinate with respect to the given a and AQL.
 Coordinate with respect to the given b and LTPD.
But, the values of n and C should be integers. So, it will be very difficult to find n and C exactly
for the given parameters of the design. Hence, we will have to look for approximate integer
values for n and C such that the O.C. curve more or less passes through the above two
coordinates.

INVENTORY CONTROL OR MANAGEMENT PRODUCTION AND OPERATIONS MANAGEMENT

Meaning of Inventory
Inventory generally refers to the materials in stock. It is also called the idle resource of an
enterprise. Inventories represent those items which are either stocked for sale or they are in
the process of manufacturing or they are in the form of materials, which are yet to be utilized.
The interval between receiving the purchased parts and transforming them into final products
varies from industries to industries depending upon the cycle time of manufacture. It is,
therefore, necessary to hold inventories of various kinds to act as a buffer between supply and
demand for efficient operation of the system. Thus, an effective control on inventory is a must
for smooth and efficient running of the production cycle with least interruptions.
Reasons for Keeping Inventories
1. To stabilize production:
The demand for an item fluctuates because of the number of factors, e.g., seasonality,
production schedule etc. The inventories (raw materials and components) should be made
available to the production as per the demand failing which results in stock out and the

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 production stoppage takes place for want of materials. Hence, the inventory is kept to take
care of this fluctuation so that the production is smooth.
2. To take advantage of price discounts:
Usually the manufacturers offer discount for bulk buying and to gain this price advantage
the materials is bought in bulk even though it is not required immediately. Thus, inventory is
maintained to gain economy in purchasing.
3. To meet the demand during the replenishment period:
The lead time for procurement of materials depends upon many factors like location of the
source, demand supply condition, etc. So inventory is maintained to meet the demand
during the procurement (replenishment) period.
4. To prevent loss of orders (sales):
In this competitive scenario, one has to meet the delivery schedules at 100 per cent service
level, means they cannot afford to miss the delivery schedule which may result in loss of
sales. To avoid the organizations have to maintain inventory.
5. To keep pace with changing market conditions:
The organizations have to anticipate the changing market sentiments and they have to stock
materials in anticipation of non-availability of materials or sudden increase in prices.
6. Sometimes the organizations have to stock materials due to other reasons like suppliers
minimum quantity condition, seasonal availability of materials or sudden increase in prices.
Meaning of Inventory Control

Inventory control in Operations Management

Inventory control is a planned approach of determining what to order, when to order and how
much to order and how much to stock so that costs associated with buying and storing are
optimal without interrupting production and sales. Inventory control basically deals with two
problems:

1. When should an order be placed? (Order level), and

2. How much should be ordered? (Order quantity).

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 These questions are answered by the use of inventory models. The scientific inventory control
system strikes the balance between the loss due to non-availability of an item and cost of
carrying the stock of an item. Scientific inventory control aims at maintaining optimum level of
stock of goods required by the company at minimum cost to the company.

Objectives of Inventory Control

1. To ensure adequate supply of products to customer and avoid shortages as far as possible.
2. To make sure that the financial investment in inventories is minimum (i.e., to see that the
working capital is blocked to the minimum possible extent).
3. Efficient purchasing, storing, consumption and accounting for materials is an important
objective.
4. To maintain timely record of inventories of all the items and to maintain the stock within the
desired limits.
5. To ensure timely action for replenishment.
6. To provide a reserve stock for variations in lead times of delivery of materials.
7. To provide a scientific base for both short-term and long-term planning of materials.
Benefits of Inventory Control
It is an established fact that through the practice of scientific inventory control, following are
the benefits of inventory control:
1. Improvement in customer’s relationship because of the timely delivery of goods and service.
2. Smooth and uninterrupted production and, hence, no stock out.
3. Efficient utilization of working capital. Helps in minimizing loss due to deterioration,
obsolescence damage and pilferage.
4. Economy in purchasing.
5. Eliminates the possibility of duplicate ordering.
Techniques of Inventory Control
In any organization, depending on the type of business, inventory is maintained. When the
number of items in inventory is large and then large amount of money is needed to create such
inventory, it becomes the concern of the management to have a proper control over its
ordering, procurement, maintenance and consumption. The control can be for order quality

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 and order frequency. The different techniques of inventory control are: (1) ABC analysis, (2)
HML analysis, (3) VED analysis, (4) FSN analysis, (5) SDE analysis, (6) GOLF analysis and (7) SOS
analysis. The most widely used method of inventory control is known as ABC analysis. In this
technique, the total inventory is categorized into three sub-heads and then proper exercise is
exercised for each sub-heads.
1. ABC analysis:
In this analysis, the classification of existing inventory is based on annual consumption and
the annual value of the items. Hence we obtain the quantity of inventory item consumed
during the year and multiply it by unit cost to obtain annual usage cost. The items are then
arranged in the descending order of such annual usage cost. The analysis is carried out by
drawing a graph based on the cumulative number of items and cumulative usage of
consumption cost. Classification is done as follows:

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The classification of ABC analysis is shown by the graph given as follows.

ABC classification

Once ABC classification has been achieved, the policy control can be formulated as follows:
A-Item:
Very tight control, the items being of high value. The control need be exercised at higher
level of authority.
B-Item:
Moderate control, the items being of moderate value. The control need be exercised at
middle level of authority.
C-Item:
The items being of low value, the control can be exercised at gross root level of
authority, i.e., by respective user department managers.

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2. HML analysis:
In this analysis, the classification of existing inventory is based on unit price of the items.
They are classified as high price, medium price and low cost items.
3. VED analysis:
In this analysis, the classification of existing inventory is based on criticality of the items.
They are classified as vital, essential and desirable items. It is mainly used in spare parts
inventory.
4. FSN analysis:
In this analysis, the classification of existing inventory is based consumption of the items.
They are classified as fast moving, slow moving and non-moving items.
5. SDE analysis:
In this analysis, the classification of existing inventory is based on the items.
6. GOLF analysis:
In this analysis, the classification of existing inventory is based sources of the items. They are
classified as Government supply, ordinarily available, local availability and foreign source of
supply items.
7. SOS analysis:
In this analysis, the classification of existing inventory is based nature of supply of items.
They are classified as seasonal and off-seasonal items. For effective inventory control,
combination of the techniques of ABC with VED or ABC with HML or VED with HML analysis
is practically used.
Inventory Model
ECONOMIC ORDER QUANTITY (EOQ)
Inventory models deal with idle resources like men, machines, money and materials. These
models are concerned with two decisions: how much to order (purchase or produce) and when
to order so as to minimize the total cost.
For the first decision how much to order, there are two basic costs are considered namely,
inventory carrying costs and the ordering or acquisition costs. As the quantity ordered is

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 increased, the inventory carrying cost increases while the ordering cost decreases. The ‘order
quantity’ means the quantity produced or procured during one production cycle. Economic
order quantity is calculated by balancing the two costs. Economic Order Quantity (EOQ) is that
size of order which minimizes total costs of carrying and cost of ordering.

i.e., Minimum Total Cost occurs when Inventory Carrying Cost = Ordering Cost
Economic order quantity can be determined by two methods:

1. Tabulation method.
2. Algebraic method.
Inventory cost curve

1. Determination of EOQ by Tabulation (Trial & Error) Method

This method involves the following steps:
1. Select the number of possible lot sizes to purchase.
2. Determine average inventory carrying cost for the lot purchased.
3. Determine the total ordering cost for the orders placed.
4. Determine the total cost for each lot size chosen which is the summation of inventory
carrying cost and ordering cost.
5. Select the ordering quantity, which minimizes the total cost.
The data calculated in a tabular column can plotted showing the nature of total cost,
inventory cost and ordering cost curve against the quantity ordered .

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 ILLUSTRATION 3:
The XYZ Ltd. carries a wide assortment of items for its customers. One of its popular items has
annual demand of 8000 units. Ordering cost per order is found to be Rs. 12.5. The carrying cost
of average inventory is 20% per year and the cost per unit is Re. 1.00. Determine the optimal
economic quantity and make your recommendations.
SOLUTION:

The table and the graph indicates that an order size of 1000 units will gives the lowest total cost
among the different alternatives. It also shows that minimum total cost occurs when carrying
cost is equal to ordering cost.

2. Determination of EOQ by Analytical Method

In order to derive an economic lot size formula following assumptions are made:

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1. Demand is known and uniform.
2. Let D denotes the total number of units purchase/produced and Q denotes the lot size in
each production run.
3. Shortages are not permitted, i.e., as soon as the level of the inventory reaches zero, the
inventory is replenished.
4. Production or supply of commodity is instantaneous.
5. Lead-time is zero.
6. Set-up cost per production run or procurement cost is C3.
7. Inventory carrying cost is C1= CI, where C is the unit cost and I is called inventory carrying
cost expressed as a percentage of the value of the average inventory.
This fundamental situation can be shown on an inventory-time diagram, with Q on the vertical
axis and the time on the horizontal axis. The total time period (one year) is divided into n parts.

The most economic point in terms of total inventory cost exists where,
Inventory carrying cost = Annual ordering cost (set-up cost)
Average inventory = 1/2 (maximum level + minimum level)
= (Q + 0)/2 = Q/2
Total inventory carrying cost = Average inventory × Inventory carrying cost per unit
i.e., Total inventory carrying cost = Q/2 × C1= QC1/2… (1)
Total annual ordering costs = Number of orders per year × Ordering cost per order
i.e.,Total annual ordering costs = (D/Q) × C3= (D/Q) C3 … (2)
Now, summing up the total inventory cost and the total ordering cost, we get the total
inventory cost C(Q).

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i.e., Total cost of production run = Total inventory carrying cost
+ Total annual ordering costs
C(Q) = QC1/2 + (D/Q)C3(cost equation) …(3)
But, the total cost is minimum when the inventory carrying costs becomes equal to the total
annual ordering costs. Therefore,
QC1/2 = (D/Q)C3
or QC1= (2D/Q)C3or Q2= 2C3D/C1
Then, optimal quantity (EOQ), Q0=
√2C3D
C1
D 0=
√2 ×16× 1800
√8.4
=82.8 or 83 lubricants (approx)

ILLUSTRATION 5:
A manufacturing company purchase 9000 parts of a machine for its annual requirements
ordering for month usage at a time, each part costs Rs. 20. The ordering cost per order is Rs. 15
and carrying charges are 15% of the average inventory per year. You have been assigned to
suggest a more economical purchase policy for the company. What advice you offer and how
much would it save the company per year?
SOLUTION:
Given data are:
Number of lubricants to be purchased, D = 9000 parts per year
Cost of part, Cs= Rs. 20
Procurement cost, C3= Rs. 15 per order
Inventory carrying cost, CI = C1= 15% of average inventory per year
= Rs. 20 × 0.15 = Rs. 3 per each part per year
Then, optimal quantity (EOQ), Q0=

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√2C3D
√C1

Q0=
√2 ×15× 300
√3
= 300 units

and Optimum order interval, (t0) =

Q0in years
D
=

300
9000
=

1 years
30
=1 × 365

30
=122 days

Minimum average cost=

=√2C3DC1
=√2 ×3 ×15 ×9000

= Rs. 900

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If the company follows the policy of ordering every month, then the annual ordering cost is = Rs
12 × 15 = Rs. 180

Lot size of inventory each month = 9000/12 = 750

Average inventory at any time = Q/2 = 750/2 = 375

Therefore, storage cost at any time = 375 × C1 = 375 × 3 = Rs. 1125
Total annual cost = 1125 + 180 = Rs. 1305
Hence, the company should purchase 300 parts at time interval of 1/30 year instead of ordering
750 parts each month. The net saving of the company will be = Rs. 1305 – Rs. 900 = Rs. 405 per
year.

JUST-IN-TIME (JIT) MANUFACTURING PRODUCTION AND OPERATIONS MANAGEMENT

Toyota Production System (TPS) JAPAN

Introduction
Just-In-Time (JIT) Manufacturing is a philosophy rather than a technique. By eliminating all
waste and seeking continuous improvement, it aims at creating manufacturing system that is
response to the market needs.
The phase just in time is used to because this system operates with low WIP (Work-In-Process)
inventory and often with very low finished goods inventory. Products are assembled just before
they are sold, subassemblies are made just before they are assembled and components are
made and fabricated just before subassemblies are made. This leads to lower WIP and reduced
lead times. To achieve this organizations have to be excellent in other areas e.g. quality.
According to Voss, JIT is viewed as a “Production methodology which aims to improve overall
productivity through elimination of waste and which leads to improved quality”.

Jit in Production and Operation Management

JIT provides an efficient production in an organization and delivery of only the necessary parts
in the right quantity, at the right time and place while using the minimum facilities”.

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 Seven Wastes
Shiego Shingo, a Japanese JIT authority and engineer at the Toyota Motor Company identifies
seven wastes as being the targets of continuous improvement in production process. By
attending to these wastes, the improvement is achieved.
1. Waste of over production eliminate by reducing set-up times, synchronizing quantities and
timing between processes, layout problems. Make only what is needed now.
2. Waste of waiting eliminate bottlenecks and balance uneven loads by flexible work force and
equipment.
3. Waste of transportation establishes layouts and locations to make handling and transport
unnecessary if possible. Minimize transportation and handling if not possible to eliminate.
4. Waste of processing itself question regarding the reasons for existence of the product and
then why each process is necessary.
5. Waste of stocks reducing all other wastes reduces stocks.
Wastes in operations

6. Waste of motion study for economy and consistency. Economy improves productivity and
consistency improves quality. First improve the motions, then mechanize or automate
otherwise. There is danger of automating the waste.

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7. Waste of making defective products develop the production process to prevent defects from
being produced, so as to eliminate inspection. At each process, do not accept defects and
makes no defects. Make the process fail-safe. A quantify process always yield quality
product.
Benefits of JIT
The most significant benefit is to improve the responsiveness of the firm to the changes in the
market place thus providing an advantage in competition. Following are the benefits of JIT:

1. Product cost—is greatly reduced due to reduction of manufacturing cycle time, reduction of
waste and inventories and elimination of non-value added operation.
2. Quality —is improved because of continuous quality improvement programs.
3. Design—Due to fast response to engineering change, alternative designs can be quickly
brought on the shop floor.
4. Productivity improvement.
5. Higher production system flexibility.
6. Administrative and ease and simplicity.

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 UNIT 4

Quality Improvement

Juran’s quality trilogy:

The Juran Trilogy was developed by Dr. Joseph Juran, and it’s something I learned about
recently in my Total Quality Management and Six Sigma course. The Juran Trilogy is an
improvement cycle that is meant to reduce the cost of poor quality by planning quality into the
product/process.

The Juran Trilogy

1. Quality Planning
In the planning stage, it is critical to define who your customers are and find out their needs
(the “voice of the customer”). After you know what your customers need, you’re able to define
the requirements for your product/process/service/system, etc., and develop it. Additionally,
any plans that might need to be transferred to operators or other key stakeholders should be
done during the planning phase. Planning activities should be done with a multidisciplinary
team, with all key stakeholders represented.

2. Quality Control
During the control phase, determine what you need to measure (what data do you need to
know if your process is working?), and set a goal for your performance. Get feedback by
measuring actual performance, and act on the gap between your performance and your goal. In
Statistical Process Control (SPC), there are several tools that could be used in the “control”
phase of the Juran Trilogy: Pareto Analysis, flow diagrams, fishbone diagram, and control
charts, to name a few.

3. Quality Improvement
There are four different “strategies” to improvement that could be applied during this phase:

 Repair: Reactive; fix what’s broken.

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 Refinement: Proactive; continually improve a process that isn’t broken (like the continual
pursuit of perfection in Lean!)

 Renovation: Improvement through innovation or technological advancement

 Reinvention: Most demanding approach; start over with a clean slate.

W. EDWARDS DEMING’S 14 POINTS FOR TOTAL QUALITY MANAGEMENT

Deming’s 14 Points on Quality Management, a core concept on implementing total quality

management, is a set of management practices to help companies increase their quality and
productivity.

Deming’s 14 Points are as follows:

1. Create constancy of purpose for improving products and services.

2. Adopt the new philosophy.
3. Cease dependence on inspection to achieve quality.
4. End the practice of awarding business on price alone; instead, minimize total cost by working
with a single supplier.
5. Improve constantly and forever every process for planning, production and service.
6. Institute training on the job.
7. Adopt and institute leadership.
8. Drive out fear.
9. Break down barriers between staff areas.

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Newton’s Engineering College,MAcherla
10. Eliminate slogans, exhortations and targets for the workforce.
11. Eliminate numerical quotas for the workforce and numerical goals for management.
12. Remove barriers that rob people of pride of workmanship, and eliminate the annual rating or
merit system.
13. Institute a vigorous program of education and self-improvement for everyone.
14. Put everybody in the company to work accomplishing the transformation.

These total quality management concepts can be put into place by any organization to more
effectively implement total quality management. As a total quality management philosophy, W.
Edwards Deming’s work is foundational to TQM and its successor, quality management
systems.

ISO 9000 SERIES PRODUCTION AND OPERATIONS MANAGEMENT

ISO in Production Management

ISO stands for International Organization for Standardization. It is an international body, which
consists of representatives from more than 90 countries. The national standard bodies of these
countries are the members of this organization. Bureau of Indian Standards (BIS) are the Indian
representative to ISO, ISO and International Electro Technical Commission (IEC)) operate jointly
as a single system. These are non-governmental organizations, which exist to provide common
standards on international trade of goods and services.

ISO 9000 standards expect firms to have a quality manual that meets ISO guidelines,
documents, quality procedures and job instructions, and verification of compliance by third-
party auditors. ISO 9000 series has five international standards on quality managements. They
are:

1. ISO 9000 — Quality management and Quality assurance standards

2. ISO 9001 — Quality systems: Quality in design
3. ISO 9002 — Quality systems: Production and Installation
4. ISO 9003 — Quality systems: Final inspection and test

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5. ISO 9004 — Quality management and systems
Objectives of ISO 9000 Series
The objectives of ISO 9000 series are listed in the following table.
ISO 9000 series

Benefits of ISO 9000 Series

ISO 9000 series provides several tangible and intangible benefits which are listed below:
1. This gives competitive advantage in the global market.
2. Consistency in quality, since ISO helps in detecting non-conformity early which makes it
possible to take corrective action.
3. Documentation of quality procedures adds clarity to quality system.
4. ISO 9000 ensures adequate and regular quality training for all members of the organization.
5. ISO helps the customers to have cost effective purchase procedure.
6. The customers while making purchases from companies with ISO certificate need not spend
much on inspection and testing. This will reduce the quality cost and lead-time.
7. This will help in increasing productivity.
8. This will aid to improved morale and involvement of workers.
9. The level of job satisfaction would be more.
Steps in ISO 9000 Registration
1. Selection of appropriate standard from ISO 9001, ISO 9002 and ISO 9003 using the guidelines
given in ISO 9000.
2. Preparation of quality manual to cover all the elements in the selected model.

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Newton’s Engineering College,MAcherla
3. Preparation of procedures and shop floor instructions which are used at the time of
implementing the system. Also document these items.
4. Self-auditing to check compliance of the selected model.
5. Selection of a registrar and making application to obtain certificate for the selected model.
A registrar is an independent body with knowledge and experience to evaluate any one of the
three models of the company’s quality system (ISO 9002). Registrars are approved and certified
by acridities.

The registrar, on successful verification and assessment will register the company. Before
selecting a registrar, one should know the following:

1. Accreditors of the registrar.

2. Background and credibility of the registrar.
3. Cost of registration through the proposed registrar.
4. Expected harmony between the company and the potential registrar while working towards
implementing ISO model in the company.
Six Sigma

Six Sigma (6σ) is a set of techniques and tools for process improvement. It was introduced by
engineer Bill Smith while working at Motorola in 1980.[1][2] Jack Welch made it central to his
business strategy at General Electric in 1995. A six sigma process is one in which 99.99966% of
all opportunities to produce some feature of a part are statistically expected to be free of
defects.

Six Sigma strategies seek to improve the quality of the output of a process by identifying and
removing the causes of defects and minimizing variability in manufacturing and business
processes. It uses a set of quality managementmethods, mainly empirical, statistical methods,
and creates a special infrastructure of people within the organization who are experts in these
methods. Each Six Sigma project carried out within an organization follows a defined sequence
of steps and has specific value targets, for example: reduce process cycle time, reduce
pollution, reduce costs, increase customer satisfaction, and increase profits.

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The term Six Sigma (capitalized because it was written that way when registered as a Motorola
trademark on December 28, 1993) originated from terminology associated with statistical
modeling of manufacturing processes. The maturity of a manufacturing process can be
described by a sigma rating indicating its yield or the percentage of defect-free products it
creates—specifically, within how many standard deviations of a normal distribution the fraction
of defect-free outcomes corresponds to. Motorola set a goal of "six sigma" for all of its
manufacturing.

Productivity

Definition:

A measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into
useful outputs.

Productivity is computed by dividing average output per period by the total costs incurred or
resources (capital, energy, material, personnel) consumed in that period. Productivity is a
critical determinant of cost efficiency.

factors affecting productivity:

The various decisions with respect to the factors are mentioned below:
1. Man Power:
Selection i.e. selection of right man for a specific job Applying well known saying division of
labour. Training i.e. consideration of training requirements whether to be imparted training in
the plant itself or to be sent for training outside the unit to other plants within the country or
abroad or training institutes. Number of personnel required i.e. man power requirement
planning in each of the departments of required skill.

2. Equipment and Machines:

The number of machine tools, their capacity and accessories required, replacement policy of
the organization and maintenance schedules etc.

3. Input Materials:
ADVERTISEMENTS:

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i. Appropriate quality of materials

ii. Material requirement planning (M.R.P.)

iii. Substitute of materials being used

iv. Inspection of input materials at various points

ADVERTISEMENTS:

v. Cost of materials procurement and handling up to stores.

4. Time:
Time is significant for the following reasons:
i. Inspection of input materials i.e. raw material and semi finished or finished items required for
assembly.

ii. Time for inspection of finished products.

iii. Production time (total time of manufacturing).

iv. Time for repair and maintenance of machines and equipment.

5. Floor Area or Space:

i. Total area covered by the administrative block, production shop and inspection & quality
control departments etc.

ii. Location of different departments and shops etc.

iii. Other space covered by plant layout.

6. Power or Energy:
ADVERTISEMENTS:

i. Maintenance of equipment for saving energy

ii. Use of renewable energy devices

iii. Use of biogas, photovoltaic cells, solar energy and other non conventional techniques.

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 7. Finance:
Finance is required to maintain all the above requirements. The management should be for
minimum rather optimum finance.

8. Movement of Man and Materials:

i. The required motion of manpower within the plant

ii. The motion of raw material semi finished and finished products/items within the plant

TOTAL PRODUCTIVE MAINTENANCE (TPM) PRODUCTION AND OPERATIONS MANAGEMENT

Total productive maintenance (TPM) is a maintenance program, which involves a newly defined
concept for maintaining plants and equipment. The goal of the TPM program is to markedly
increase production while, at the same time, increasing employee morale and job satisfaction.
It can be considered as the medical science of machines.

TPM brings maintenance into focus as a necessary and vitally important part of the business. It
is no longer regarded as a non-profit activity. Downtime for maintenance is scheduled as a part
of the manufacturing day and, in some cases, as an integral part of the manufacturing process.
The goal is to hold emergency and unscheduled maintenance to a minimum.

TPM was introduced to achieve the following objectives. The important ones are listed below.

 Avoid wastage in a quickly changing economic environment.

 Producing goods without reducing product quality.
 Reduce cost.
 Produce a low batch quantity at the earliest possible time.
 Goods send to the customers must be non-defective.
Similarities and Differences between TQM and TPM
The TPM program closely resembles the popular Total Quality Management (TQM) program.
Many of the tools such as, employee empowerment, benchmarking, documentation, etc. used

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Newton’s Engineering College,MAcherla
 in TQM are used to implement and optimize TPM. Following are the similarities between the
two:
1. Total commitment to the program by upper level management is required in both programs,
2. Employees must be empowered to initiate corrective action, and
3. A long-range outlook must be accepted as TPM may take a year or more to implement and is
an on-going process. Changes in employee mind-set toward their job responsibilities must
take place as well.
The differences between TQM and TPM are summarized below.

Pillars of TPM

PILLAR 1-5S

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TPM starts with 5S. Problems cannot be clearly seen when the work place is unorganized.
Cleaning and organizing the workplace helps the team to uncover problems. Making problems
visible is the first step of improvement.

SEIRI—Sort out
This means sorting and organizing the items as critical, important, frequently used items,
useless, or items that are not need as of now. Unwanted items can be salvaged. Critical items
should be kept for use nearby and items that are not be used in near future, should be stored in
some place. For this step, the worth of the item should be decided based on utility and not cost.
As a result of this step, the search time is reduced.

SEITON—Organize
The concept here is that “Each item has a place and only one place”. The items should be
placed back after usage at the same place. To identify items easily, name plates and colored
tags has to be used. Vertical racks can be used for this purpose, and heavy items occupy the
bottom position in the racks.
SEISO—Shine the Workplace
This involves cleaning the work place free of burrs, grease, oil, waste, scrap etc. No loosely
hanging wires or oil leakage from machines.

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 SEIKETSU—Standardization
Employees has to discuss together and decide on standards for keeping the work
place/machines/pathways neat and clean. These standards are implemented for whole
organization and are tested/inspected randomly.
SHITSUKE—Self-discipline
Considering 5S as a way of life and bring about self-discipline among the employees of the
organization. This includes wearing badges, following work procedures, punctuality, dedication
to the organization etc.
PILLAR 2—JISHU HOZEN (AUTONOMOUS MAINTENANCE)
This pillar is geared towards developing operators to be able to take care of small maintenance
tasks, thus freeing up the skilled maintenance people to spend time on more value added
activity and technical repairs. The operators are responsible for upkeep of their equipment to
prevent it from deteriorating.

Steps in JISHU HOZEN

1. Train the employees:
Educate the employees about TPM, its advantages, JH advantages and steps in JH. Educate
the employees about abnormalities in equipments.
2. Initial cleanup of machines

 Supervisor and technician should discuss and set a date for implementing step 1.
 Arrange all items needed for cleaning.
 On the arranged date, employees should clean the equipment completely with the help
of maintenance department.
 Dust, stains, oils and grease has to be removed.
 Following are the things that have to be taken care while cleaning. They are oil leakage,
loose wires, unfastened nits and bolts and worn out parts.

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  After clean up problems are categorized and suitably tagged. White tags are place where
operators can solve problems. Pink tag is placed where the aid of maintenance
department is needed.
 Contents of tag are transferred to a register.
 Make note of area, which were inaccessible.
 Finally close the open parts of the machine and run the machine.
3. Counter measures
 Inaccessible regions had to be reached easily, e.g., if there are many screw to open a
flywheel door, hinge door can be used. Instead of opening a door for inspecting the
machine, acrylic sheets can be used.
 To prevent work out of machine parts necessary action must be taken.
 Machine parts should be modified to prevent accumulation of dirt and dust.


4. Tentative standard

 JH schedule has to be made and followed strictly.

 Schedule should be made regarding cleaning, inspection and lubrication and it also
should include details like when, what and how.
5. General inspection

 The employees a re trained in disciplines like pneumatics, electrical, hydraulics, lubricant

and coolant, drives, bolts, nuts and safety.
 This is necessary to improve the technical skills of employees and to use inspection
manuals correctly.
 After acquiring this new knowledge the employees should share this with others.
 By acquiring this new technical knowledge, the operators are now well aware of machine
parts.
6. Autonomous inspection

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  New methods of cleaning and lubricating are used.
 Each employee prepares his own autonomous chart/schedule in consultation with
supervisor.
 Parts which have never given any problem or part which don’t need any inspection are
removed from list permanently based on experience.
 Including good quality machine parts. This avoids defects due to poor JH.
 Inspection that is made in preventive maintenance is included in JH.
 The frequency of cleanup and inspection is reduced based on experience.
7. Standardization

 Up to the previous stem only the machinery/equipment was the concentration. However,
in this step the surroundings of machinery are organized. Necessary items should be
organized, such that there is no searching and searching time is reduced.
 Work environment is modified such that there is no difficulty in getting any item.
 Everybody should follow the work instructions strictly.
 Necessary spares for equipments is planned and procured.
8. Autonomous management
 OEE and OPE and other TPM targets must be achieved by continuous improve through
Kaizen.
 PDCA (Plan, Do, Check and Act) cycle must be implemented for Kaizen.
PILLAR 3—KAIZEN
‘Kai’ means change, and ‘Zen’ means good (for the better). Basically Kaizen is for small
improvements, but carried out on a continual basis and involve all people in the organization.
Kaizen is opposite to big spectacular innovations. Kaizen requires no or little investment. The
principle behind is that “a very large number of small improvements are more effective in an
organizational environment than a few improvements of large value.” This pillar is aimed at
reducing losses in the workplace that affect our efficiencies. By using a detailed and thorough
procedure we eliminate losses in a systematic method using various Kaizen tools. These

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 activities are not limited to production areas and can be implemented in administrative areas as
well.
Kaizen Policy
1. Practice concepts of zero losses in every sphere of activity.
2. Relentless pursuit to achieve cost reduction targets in all resources.
3. Relentless pursuit to improve overall plant equipment effectiveness.
4. Extensive use of PM analysis as a tool for eliminating losses.
5. Focus of easy handling of operators.
Kaizen Target
Achieve and sustain zero loses with respect to minor stops, measurement and adjustments,
defects and unavoidable downtimes. It also aims to achieve 30% manufacturing cost reduction.
Tools used in Kaizen
1. PM analysis
2. Why-Why analysis
3. Summary of losses
4. Kaizen register
5. Kaizen summary sheet.
The objective of TPM is maximization of equipment effectiveness. TPM aims at maximization of
machine utilization and not merely machine availability maximization. As one of the pillars of
TPM activities, Kaizen pursues efficient equipment, operator and material and energy
utilization, which is extremes of productivity and aims at achieving substantial effects. Kaizen
activities try to thoroughly eliminate 16 major losses.

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 16 Major Losses in an Organization

PILLAR 4—PLANNED MAINTENANCE

It is aimed to have trouble free machines and equipments producing defect free products for
total customer satisfaction. This breaks maintenance down into 4 ‘families’ or groups, which
was defined earlier.
1. Preventive maintenance
2. Breakdown maintenance
3. Corrective maintenance
4. Maintenance prevention
With planned maintenance, we evolve our efforts from a reactive to a proactive method and
use trained maintenance staff to help train the operators to better maintain their equipment.

Policy
1. Achieve and sustain availability of machines;
2. Optimum maintenance cost;

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3. Reduces spares inventory; and
4. Improve reliability and maintainability of machines.
Target
1. Zero equipment failure and breakdown;
2. Improve reliability and maintainability by 50%;
3. Reduce maintenance cost by 20%; and
4. Ensure availability of spares all the time.
Six Steps in Planned Maintenance
1. Equipment evaluation and recoding present status;
2. Restore deterioration and improve weakness;
3. Building up information management system;
4. Prepare time based information system, select equipment, parts and members and map out
plan;
5. Prepare predictive maintenance system by introducing equipment diagnostic techniques;
and
6. Evaluation of planned maintenance.
PILLAR 5—QUALITY MAINTENANCE
It is aimed towards customer delight through highest quality through defect free
manufacturing. Focus is on eliminating non-conformances in a systematic manner, much like
Focused Improvement.
We gain understanding of what parts of the equipment affect product quality and begin to
eliminate current quality concerns, then move to potential quality concerns. Transition is from
reactive to proactive (Quality Control to Quality Assurance).

QM activities are to set equipment conditions that preclude quality defects, based on the basic
concept of maintaining perfect equipment to maintain perfect quality of products. The
conditions are checked and measure in time series to very that measure values are within
standard values to prevent defects. The transition of measured values is watched to predict
possibilities of defects occurring and to take counter measures before hand.

Policy

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1. Defect free conditions and control of equipments;
2. QM activities to support quality assurance;
3. Focus of prevention of defects at source;
4. Focus on poka-yoke (fool proof system);
5. In-line detection and segregation of defects; and
6. Effective implementation of operator quality assurance.
Target
1. Achieve and sustain customer complaints at zero;
2. Reduce in-process defects by 50%; and
3. Reduce cost of quality by 50%.
Data Requirements
Quality defects are classified as customer end defects and in house defects. For customer- end
data, we have to get data on:
1. Customer end line rejection; and
2. Field complaints.
In-house, data include data related to products and data related to process.

Data Related to Product

1. Product-wise defects;
2. Severity of the defect and its contribution—major/minor;
3. Location of the defect with reference to the layout;
4. Magnitude and frequency of its occurrence at each stage of measurement;
5. Occurrence trend in beginning and the end of each production/process/changes (like
pattern change, ladle/furnace lining etc.); and
6. Occurrence trend with respect to restoration of breakdown/modifications/periodical
replacement of quality components.
Data Related to Processes
1. The operating condition for individual sub-process related to men, method, material and
machine;
2. The standard settings/conditions of the sub-process; and

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3. The actual record of the settings/conditions during the defect occurrence.
PILLAR 6—TRAINING
It is aimed to have multi-skilled revitalized employees whose morale is high and who has eager
to come to work and perform all required functions effectively and independently. Education is
given to operators to upgrade their skill. It is not sufficient know only ‘Know-How’ by they
should also learn ‘Know-Why’. By experience they gain, ‘Know-How’ to overcome a problem
what to be done. This they do without knowing the root cause of the problem and why they are
doing so. Hence, it becomes necessary to train them on knowing ‘Know-Why’. The employees
should be trained to achieve the four phases of skill. The goal is to create a factory full of
experts. The different phase of skills is:
Phase 1: Do not know.
Phase 2: Know the theory but cannot do.
Phase 3: Can do but cannot teach.
Phase 4: Can do and also teach.
Policy
1. Focus on improvement of knowledge, skills and techniques;
2. Creating a training environment for self-learning based on felt needs;
3. Training curriculum/tools/assessment etc. conducive to employee revitalization; and
4. Training to remove employee fatigue and make work enjoyable.
Target
1. Achieve and sustain downtime due to want men at zero on critical machines;
2. Achieve and sustain zero losses due to lack of knowledge/skills/techniques; and
3. Aim for 100% participation in suggestion scheme.
Steps in Educating and Training Activities
1. Setting policies and priorities and checking present status of education and training;
2. Establish of training system for operation and maintenance skill upgradation;
3. Training the employees for upgrading the operation and maintenance skills;
4. Preparation of training calendar;
5. Kick-off of the system for training; and

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6. Evaluation of activities and study of future approach.
PILLAR 7—OFFICE TPM
Office TPM should be started after activating four other pillars of TPM (JH, KK, QM, PM). Office
TPM must be followed to improve productivity, efficiency in the administrative functions and
identify and eliminate losses. This includes analyzing processes and procedures towards
increased office automation. Office TPM addresses twelve major losses. They are:
1. Processing loss;
2. Cost loss including in areas such as, procurement, accounts, marketing, sales leading to high
inventories;
3. Communication loss;
4. Idle loss;
5. Set-up loss;
6. Accuracy loss;
7. Office equipment breakdown;
8. Communication channel breakdown, telephone and fax lines;
9. Time spent on retrieval of information;
10. Non availability of correct on-line stock status;
11. Customer complaints due to logistics; and
12. Expenses on emergency dispatches/purchases.
Office TPM and its Benefits
1. Involvement of all people in support functions for focusing on better plant performance;
2. Better utilized work area;
3. Reduce repetitive work;
4. Reduced inventory levels in all parts of the supply chain;
5. Reduced administrative costs;
6. Reduced inventory carrying cost;
7. Reduction in number of files;
8. Reduction of overhead costs (to include cost of non-production/non-capital equipment);
9. Productivity of people in support functions;

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Newton’s Engineering College,MAcherla
10. Reduction in breakdown of office equipment;
11. Reduction of customer complaints due to logistics;
12. Reduction in expenses due to emergency dispatches/purchases;
13. Reduced manpower; and
14. Clean and pleasant work environment.
PILLAR 8—SAFETY, HEALTH AND ENVIRONMENT
Target
1. Zero accident,
2. Zero health damage, and
3. Zero fires.
In this area focus is on to create a safe workplace and a surrounding area that is not damaged
by our process or procedures. This pillar will play an active role in each of the other pillars on a
regular basis.

A committee is constituted for this pillar, which comprises representative of officers as well as
workers. The committee is headed by senior vice President (Technical). Utmost importance to
safety is given in the plant. Manager (safety) is looking after functions related to safety. To
create awareness among employees various competitions like safety slogans, quiz, drama,
posters, etc. related to safety can be organized at regular intervals.

Today, with competition in industry at an all time high, TPM may be the only thing that stands
between success and total failure for some companies. It has been proven to be a program that
works. It can be adapted to work not only in industrial plants, but also in construction, building
maintenance, transportation, and in a variety of other situations. Employees must be educated
and convinced that TPM is not just another ‘program of the month’ and that management is
totally committed to the program and the extended time frame necessary for full
implementation. If everyone involved in a TPM program does his or her part, an unusually high
rate of return compared to resources invested may be expected.

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Newton’s Engineering College,MAcherla
 UNIT 5

Stores Management

Stores Management
Store is an important component of material management since it is a place that keeps the
materials in a way by which the materials are well accounted for, are maintained safe, and are
available at the time of requirement. Storage is an essential and most vital part of the
economic cycle and store management is a specialized function, which can contribute
significantly to the overall efficiency and effectiveness of the materials function. Literally store
refers to the place where materials are kept under custody.
Typically a store has a few processes and a space for storage. The main processes (Fig 1) of
store are (i) to receive the incoming materials (receiving), (ii) to keep the materials as long as
they are required for use (keeping in custody), and (iii) to move them out of store for use
(issuing). The auxiliary process of store is the stock control also known as inventory control. In a
manufacturing organization, this process of receiving, keeping in custody, and issuing forms a
cyclic process which runs on a continuous basis. The organizational set up of the store depends
upon the requirements of the organization and is to be tailor made to meet the specific needs
of the organization.

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Newton’s Engineering College,MAcherla
Fig 1 Main processes of a store
Store is to follow certain activities which are managed through use of various resources. Store
management is concerned with ensuring that all the activities involved in storekeeping and
stock control are carried out efficiently and economically by the store personnel. In many cases
this also encompasses the recruitment, selection, induction and the training of store personnel,
and much more.
The basic responsibilities of store are to act as custodian and controlling agent for the materials
to be stored, and to provide service to users of these materials. Proper management of store
systems provide flexibility to absorb the shock variation in demand, and enable purchasing to
plan ahead.
Since the materials have a cost , the organization is to manage the materials in store in such a
way so that the total cost of maintaining materials remains optimum.
Store needs a secured space for storage. It needs a proper layout along with handling and
material movement facilities such as cranes, forklifts etc, for safe and systematic handling as
well as stocking of the materials in the store with an easy traceability and access. It is to
maintain all documents of materials that are able to trace an item , show all its details and

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Newton’s Engineering College,MAcherla
preserve it up to its shelf life in the manner prescribed or till it is issued for use. Store is to
preserve the stored materials and carry out their conservation as needed to prevent
deterioration in their qualities. Also store is to ensure the safety of all items and materials
whilst in the store which means protecting them from pilferage, theft, damage, deterioration,
and fire.
The task of storekeeping relates to safe custody and preservation of the materials stocked, to
their receipts, issue and accounting. The objective is to efficiently and economically provide the
right materials at the time when it is required and in the condition in which it is required. The
basic job of the store is to receive the materials and act as a caretaker of the materials and
issue them as and when they are needed for the activity of the organization.
Once the material has been received and cleared through inspection and accepted for use, it
needs safe custody of the stores. The role of custody is to receive and preserve the material. A
stage comes when the material is needed for use. Store at that time releases the material from
its custody to the user department and the process is called ‘issue of goods. It might also
happen that after partial use , some materials having useable value in future are returned to
the store and thus they also become part of the custody again.
Storekeeping activity does not add any value to the materials. In fact it adds only to the cost.
The organization is to spend money on space (expenditure on land, building passage and
roads), machinery (store equipment), facilities (e.g. water, electricity, communication etc.),
personnel, insurance, maintenance of store equipment, stationary etc. All of these get added
to the organizational overheads and finally get reflected in the costing of the finished product.
However, it is an essential function in any organization.
Objectives of store management
An efficient stores management has normally the following main objectives.
 To ensure uninterrupted supply of materials without delay to various users of the
organization.
 To prevent overstocking and under stocking of the materials
 To ensure safe handling of materials and prevent their damage.
 To protect materials from pilferage, theft, fire and other risks

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Newton’s Engineering College,MAcherla
 To minimize the cost of storage
 To ensure proper and continuous control over the materials.
 To ensure most effective utilization of available storage space
 To optimize the efficiency of the personnel engaged in the store
Classification of stores
Store can be of temporary nature which means that it has a limited life. Store can also be of
permanent nature. Stores are classified basically in the following broad categories.
 Functional stores – Functional stores are named based on the function of the materials
stored. Examples are fuels store, chemicals store, tools store, raw materials store, spare
parts store, equipment store, refractories store, electric store, explosives store, and finished
goods store etc.
 Physical stores – Physically stores can be centralized stores or decentralized stores. These
stores are named based on the size and location of the store. Examples are central store, sub
store, department store, site store, transit stores, receipt store, intermediate store, open
yard store, and covered store etc.
 Stores are also classified by naming them after the departments to which they serve.
Examples are construction stores, operation stores, rolling mill stores, blast furnace stores,
and steel melting shop stores etc.
 Stores are sometimes classified based on the nature of materials stored in them. Examples
are general store, bonded store, perishable store, inflammable store, salvage store, reject
store, and quarantine store etc.
Centralized storage of materials in a central store has advantages as well as certain
disadvantages. The following are the advantages.
 Centralized store can cater to a wider range of materials which is not possible in a smaller
store. Hence user department is to look for the material of its need only at one place.
 It contributes to the inventory control in the entire organization since the requirement of all
the departments gets clubbed up.
 It makes better control feasible.

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Newton’s Engineering College,MAcherla
 It provides economy in storage space as materials when stored in larger quantities, occupy
less specific space.
 Large stores can be provided with better and modern handling facilities. The operation can
also be automated.
 Delivery at a single point decreases cost of delivery.
 Receipt and inspection of the materials can be organized more efficiently.
 Improved opportunities are available for the standardization of inventory.
 The turnover of materials is increased because of the maintenance of lower inventory and
the probability of deterioration of materials during storage is correspondingly decreased.
 Manpower requirement for managing of stores get reduced. Also the duplication of records
which takes place in decentralized store system is avoided.
The disadvantages of a centralized store is as follows.
Distance from the store and the user department gets increased which requires higher
transportation needs from the store to the user department.
 If there are slippages or system not being well organized then there can be shortages of the
materials which may results into unnecessary interruptions in production.
 There may be necessity of additional internal documentation in the store.
 The risks due to the fire and thefts are higher since the entire stock of the materials are
concentrated at one place.
 The variety of materials to be stored can be large and it can create complications in the
systematic storage as well as in storage procedures.
Functions of a store
Store personnel are responsible for carrying out the following functions.
 Receipt of incoming materials
 Supervision of unloading of materials and tallying of materials
 Checking for damages or shortages and preparation of the report
 Filling of ‘goods inward’, ‘day book’, or ‘daily collection’ register
 Completion of vendors consignment note (challan)
 Making arrangement for inspection and getting the inspection completed

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Newton’s Engineering College,MAcherla
 Preparation of ‘goods receipt note’ (GRN)
 Preparation of ‘goods rejection memo’ (in case of rejection of materials)
 Sending of materials to the respective stores
 Sending of the relevant documents to the respective departments
 Ensuring all storage and material handling facilities are in proper working order
 Ensuring good housekeeping and cleanliness in the storage space
 Checking, counting and tallying of materials before issue
 Making prompt entries in ‘Bin card’ or stock card
 Ensuring correct documentation of material receipts and material issues
 Ensuring safe and proper handling of materials so as not to damage them
 Ensuring proper record keeping and correct accounting of materials
 Ensuring regular stock verification
 Ensuring that rules and regulations relating to physical custody and preservation of materials
are followed
 Ensuring safety of materials and personnel
In the long drawn process of preserving the materials till its use ,some materials might get
obsolete and unserviceable and may require removal from stores for clearing space for other
incoming goods. This activity is known as disposal of materials for which auction etc is done.
The materials , lying unused but have future economic value are said to form inventory, which
needs professional handling. Inventory management thus is an important aspect of the stores
function. One of the basic functions of store is to account for every material received in the
store by maintaining proper records of all the incoming, stored and outgoing materials so that
proper accounting and audit trail is maintained.
Hence , record keeping is a vital function of store . Of course , it also goes along the various
other activities. With the development in the information technology, the record keeping in
store is also these days through electronic medium making the whole process smooth and
efficient.
Store is to operate in the close relationship with the purchase department. In addition to the
day to day coordination with the purchase department, there are other important activities

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Newton’s Engineering College,MAcherla
which can best be done by close cooperation between stores and purchase. These are as
follows.
 Identification or coding of the materials
 Variety reduction
 Inventory control value analysis
 Disposal of materials no more needed in the sore, or the salvaging operations etc.
 Procurement of automatic procurement items (API) where the procurement is to be done
based on minimum stock levels. Store sends indents to purchase based on inventory levels
determined in accordance with usage and delivery lead times
 Coordination with respect to the material specification
 Coordination regarding ‘lot sizes’ of the materials for purchase which should suit production
requirements, transport, handling and storage space
 Close communication between purchase and stores with respect to order placement, receipt
of materials, rejections, shortages, breakages, theft and loss of materials , if any. Also
information is to flow with regard to changing production trends, slow or non moving stock,
obsolete or surplus stock, scrap, etc.
VALUE ANALYSIS PRODUCTION AND OPERATIONS MANAGEMENT

Value engineering or value analysis had its birth during the World War II Lawrence D. Miles was
responsible for developing the technique and naming it. Value analysis is defined as “an
organized creative approach which has its objective, the efficient identification of unnecessary
cost-cost which provides neither quality nor use nor life nor appearance nor customer
features.”
Value analysis focuses engineering, manufacturing and purchasing attention to one objective-
equivalent performance at a lower cost.

Value Analysis in Operations Management

Value analysis is concerned with the costs added due to inefficient or unnecessary
specifications and features. It makes its contribution in the last stage of product cycle, namely,
the maturity stage. At this stage, research and development no longer make positive

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Newton’s Engineering College,MAcherla
 contributions in terms of improving the efficiency of the functions of the product or adding new
functions to it.

Value is not inherent in a product, it is a relative term, and value can change with time and
place. It can be measured only by comparison with other products which perform the same
function. Value is the relationship between what someone wants and what he is willing to pay
for it. In fact, the heart of value analysis technique is the functional approach. It relates to cost
of function whereas others relate cost to product. It is denoted by the ratio between function
and cost.

Value= Function / Cost

Value Analysis Framework

The basic framework for value analysis approach is formed by the following questions, as given
by Lawrence D. Miles:
1. What is the item?
2. What does it do?
3. What does it cost?
4. What else would do the job?
What would the alternative cost be?
Value analysis requires these questions to be answered for the successful implementation of
the technique.
Steps in Value Analysis
In order to answer the above questions, three basic steps are necessary:
Identifying the function:
Any useful product has some primary function which must be identified a bulb to give light,
a refrigerator to preserve food, etc. In addition it may have secondary functions such as
withstanding shock, etc. These two must be identified.
Evaluation of the function by comparison:

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Newton’s Engineering College,MAcherla
 Value being a relative term, the comparison approach must be used to evaluate functions.
The basic question is, ‘Does the function accomplish reliability at the best cost’ and can be
answered only comparison.
1. Develop alternatives:
Realistic situations must be faced, objections should overcome and effective engineering
manufacturing and other alternatives must be developed. In order to develop effective
alternatives and identify unnecessary cost the following thirteen value analysis principles
must be used:
1. Avoid generalities.
2. Get all available costs.
3. Use information only from the best source.
4. Brain-storming sessions.
Blast, create and refine: In the blast stage, alternative productive products, materials,
processes or ideas are generated. In the ‘create’ stage the ideas generated in the blast
stage are used to generate alternatives which accomplish the function almost totally. In
the refining stage the alternatives generated are sifted and refined so as to arrive at the
final alternative to be implemented.

5. Identify and overcome road blocks.

6. Use industry specialists to extend specialized knowledge.
7. Key tolerance not to be too light.
8. Utilize the pay for vendors’ skills techniques.
9. Utilize vendors’ available functional products.
10. Utilize speciality processes.
11. Utilize applicable standards.
12. Use the criterion ‘Would I spend my money this way?’

Ch. Sumathi Devi

Newton’s Engineering College,MAcherla