OPERATION

MANAGEMENT
(ONLY FOR CMA)

Amarendra Kumar
Cont No. : 9873088920

Classes at :
Laxmi Nagar & Patel Nagar
 Published by :
AMARENDRA KUMAR

Printed by :
Lakshmi Printing Press
Ph. : 09313318851

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 Dedicated
to
My Parents

Mr. J.P. Sinha

& Smt. Ramki Devi
 CONTENTS
CHAPTERS Page No.
Unit 1 OPERATION MANAGEMENT & DESIGNING
AND MANAGING OPERATION 1-8

Unit 2 FORECASTING 9 - 43
Capacity Planning And Utilization 14
Economic Batch Quantity 18
Plant Layout 20
Aggregate Planning 38
Material Requirement Planning 42

Unit 3 DESIGN OF OPERATION SYSTEM AND CONTROL 44 - 55

Unit 4 TIME STUDY, MOTION STUDY AND WORK STUDY 56 - 116

Production Planning And Control 64
Scheduling Problems 68
Linear Programming 74
Linear Programming (Graphical Method) 82
Linear Programming – The Simplex Method 84
Transportation 86
Assignment 92
Queuing Theory 99
Simulation 110

Unit 5 PRODUCTIVITY MANAGEMENT AND TOTAL

QUALITY MANAGEMENT 117 - 133

Unit 6 PROJECT MANAGEMENT 134 - 158

Unit 7 MAINTENANCE MANAGEMENT 159 - 171

Replacement Theory 166

Unit 8 SOME IMPORTANT QUESTIONS WITH SOLUTIONS 172 - 198

Objective Type Questions & Answers 179
 UNIT 1

OPERATION MANAGEMENT
& DESIGNING AND
MANAGING OPERATION

INTRODUCTION
Operations management is the management of that part of an organization that is responsible
for producing goods and/or services. There are examples of these goods and services all around
us. For clear idea of Operations Management, first of all we have an idea of ‘Operating Systems’.
An Operating System is defined as ‘a configuration of resources combined for the provision
of goods or services. Any operating system converts inputs, using physical resources, to create
outputs, the function of which is to satisfy customers wants. The creation of goods or services
involves transforming or converting inputs into outputs. Various inputs such as capital, labour,
and information are used to create goods or services using one or more transformation processes
(e.g., storing, transporting, and cutting).
Retail organizations, hospitals, bus and taxi services, tailors, motels and dentists are all
examples of operating systems.
To ensure that the desired output are obtained, an organization takes measurements at various
points in the transformation process (feedback) and then compares with them with previously
established standards to determine whether corrective action is needed (control).

Figure 1 Depicts the conversion system

It is important to note that goods and services often occur jointly. For example, having the oil
changed in your car is a service, but the oil that is delivered is a good. Similarly, house painting is
a service, but the paint is a good.
RESOURCES OF OPERATING SYSTEM
The physical resources generally utilized by operating systems can be categorized for convenience
in the in the following manner:-
(a) Materials: Physical items that are consumed or converted by the system. e.g. raw
materials, fuel, indirect materials, etc.
(b) Machines/ (Facilities): Those physical items that are utilized by the system, so that the
consumption/conversion of materials can be done in an optimum manner. e.g.- plant,
tools vehicles, buildings etc.
(c) Labour or Men: The people who provide or contribute to the operation of the system
and ensure that the machines and materials are effectively used.
4 Principal functions of an operating system

PRINCIPAL FUNCTION OF OPERATING FUNCTION

The functions of an operating system is a reflection of the purpose it serves for its customers. The
following four principal functions identified below also relate to the basic four operations done
in any organization:

1) Manufacture: Manufacturing function is the one which involves some physical

transformation, or a change in the form utility of the resources

2) Transport: This function of operating system provides a change in the place utility of
something or someone in order to satisfy customer There is no major change in the
form of resources.

3) Supply: This function provides a change in the possession utility of a resource, i.e., the
ownership or possession of goods is changed.

4) Service: This function primarily results in a change in the state utility of a resource. The
principal common characteristic is the treatment or accommodation of something or
someone. The state or condition of the physical outputs will differ from the inputs as
they have undergone same kind of treatment.
Structures of Operating Systems:

STRUCTURE OF OPERATING SYSTEM

When systems are categorized by functions, then one gets an idea of their scope and purpose, but
little is known about their nature. However, the nature of the system influences how operations
managers tackles problems. So in order to distinguish different operating systems from an internal
managerial view point, it is important at consider the structure of systems.

Using simple systems terminology all operating systems may be seen to comprise inputs, processes
and outputs in the manner of Figure 1. This simple system structure can represent any operating
system at any level of detail, e.g. an organization as a whole, or some part of it. As a descriptive
device it is limited, so we must examine system structure in slightly more detail. The terminology
of Figure 2 will be used for this purpose.
2 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
 Fig 2

With this simple approach we can identify four simple structures for operating systems:
(a) ‘Make from stock, to stock, to customer’, i.e. all input resources are stocked and the
customer is served from a stock of finished goods.
(b) ‘Make from source, to stock, to customer’, i.e. no input resource stocks are held, but
goods are produced to stock.
(c) ‘Make from stock, direct to customer’, i.e. all input resources are stocked but goods are
made only against and on receipt of customers’ orders.
(d) ‘Make from source, direct to customer’, i.e no input resource stocks are held and all
goods are made only against and on receipt of customers’ orders.
These four basic structures for manufacture and supply systems are shown in Figure 3.

Figure 3: Basic system structures for manufacture and supply

For example, in transport, a taxi, ambulance or bus service moves customers or something
supplied by them, e.g. pieces of luggage. In service systems, e.g. hospitals or motels, the
customer is treated in person. in other words, unlike manufacture and supply, transport
and service systems are activated or ‘triggered’ by an input or supply. In manufacture
and supply the customers act directly on output. Somewhat different structures are
therefore required to represent transport and service systems. Three structures would
seem to exist, as illustrated in Figure 4.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 3

 (e) ‘Function from stock, and from customer’, i.e. input resources are stocked, except in the
case of customer inputs where no queuing exists.
(f) ‘Function from source, and from customer queue’, i.e. no input resources are stocked
although customer inputs accumulate in a queue (or stock).
(g) ‘Function from stock, and from customer queue’, in which all inputs are stocked and/or
allowed to accumulate in stocks.

FIG 4

Customer queues are physical stocks in the customer input channel, although they cannot be
utilized by operations management in the same way as other resource stocks, for they are usually
beyond their direct control. Queues comprise those customers who have ‘arrived’ at the system
and await service or transport. They are the customers who at any one time have asked to be
‘treated’ by the system. The queue therefore represents known and committed future demand.
In total, therefore, we have seven basic structures for operating systems. They are listed in
Figure 5

FIG -5

4 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Single channels for outputs and only with physical flows. However, this type of approach can be
used to describe more complex systems. Furthermore, these basic system models can be used
to describe operating systems at any level of detail - the organization, a division, a department, a
section, etc. -depending on our particular focus.

FIG 6

OPERATION MANAGEMENT
Operation management is defined as the management which is concerned with the design and
the operation of systems for manufacture, transport, supply or service.

OBJECTIVE OF OPERATION MANAGEMENT

Customer service
The first objective of operating systems is to utilize resources for the satisfaction of customer
wants. Customer service is therefore a key objective of operations management.
Customers should want the particular outputs of the operating systems; this is the primary
condition for their being customers. Other considerations, however, will exist and for simplicity
these can be considered in terms of costs and timing. Thus, using the classic marketing phrase,
one objective of operations management is to ensure customer satisfaction by providing the right
thing at the right price at the right time’.
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 5
These three aspects of customer service - specification, cost and timing - are summarized as
follows

Primary consideration
To satisfy customers in respect of specifications,i.e. to provide what customers want or expect or
will accept

Other consideration
To satisfy customers in respect of costs, i.e. to minimize the cost to the customer and
To satisfy customers in respect of timing, i.e. to provide goods or services when required
orexpected (and in the case of service and transport with an acceptable duration)

Resource utilization
Using conventional definitions, i.e. ‘the ratio of useful output to input’, efficiency would take
a value between 0 and 1. Although this measure might be of relevance in essentially physical
activities, it is inappropriate for organizations as a whole, since in many cases the objectives
will be to output more than is input, i.e. the concept of profit or ‘value added’. For this reason
the term ‘effectiveness’ might be preferred, since it suggests perhaps the extent or degree of
success in the achievement of given ends. Operations management is concerned essentially with
the utilization of resources, i.e. obtaining maximum effect from resources or minimizing their
loss, under-utilization or waste. The extent of the utilization of the resources’ potential might be
expressed in terms of the proportion of available time used or occupied, space utilization, levels
of activity, etc.

The conflict of objectives

The twin objectives of operations management. Operations management is concerned with the
achievement of both satisfactory customer service and resource Utilization. Operations managers
must attempt to balance these two basic objectives. They will be judged against
both, and the relative importance -attached by any Organization to each may be influenced by
them. An improvement in one Will often give rise to a deterioration in the other. Often both
cannot be maximized, and hence a satisfactory performance must be achieved on both and sub-
optimization must be avoided. All of the activities of operations management must be tackled
with these two objectives in mind, and it is from this ‘conflict’ that many of the problems faced
by operations managers

The balance of objectives

The type of balance established both between and within these two basic objectives will
be influenced by market considerations, competition, the strengths and weaknesses of the
organization, etc. The operations manager should make a contribution when these objectives are
set, but such decisions rarely rest entirely within the operations function.
This balance will generally differ between organizations (and may change over time). The fact of
this difference is one reason why the operations management job is not the same in different
organizations.

6 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

BASIC FUNCTION OF BUSINESS ORGANISATION
Business organizations typically have three basic functional areas, as depicted in finance,
marketing and operations. It doesn’t matter whether the business is a retail store, a hospital, a
manufacturing firm,a car wash, or some other type of business, all business organizations have
these three basic functions.
The essence of the operations function is to add value during the transformation process: Value
added is the term used to describe the difference between the cost of inputs and the value or
price of outputs. In non profit organizations, the value of outputs
The three basic functions of business organizations.

The operations function involves the conversion of inputs into outputs

SCOPE OF OPERATION MANAGEMENT

The scope of operations management ranges across the organization. Operations management
people are involved in product and service design, process selection, selection and management
of technology, design of work systems, location planning, facilities planning, and quality
improvement of the organization’s products or services.

Operations problems and decisions

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 7

The relationship of the three principal operations management problem areas

Common Problem Areas

Certain problems which face operations managers have much the same ‘appearance’ and require
much the same approach in each type of operating system. They are also important but they do
not differentiate different types of operating system.
a) Goods/Services Design and Specification
The design of the goods/services will often be the responsibility of a separate function
within the company or even a separate company. A major contribution will often be
made by both operations and marketing functions, since it is their responsibility to
provide the offering
b) Process/System Design and Specification
Operations managers will have considerable influence in determining or influencing the
nature, i.e. the structure, of the system which they are to manage.
Location of Facilities
The location of the organization, or the static parts of the organization, must be
determined internationally, nationally and locally.
c) Layout of Facilities Resources and Materials Handling
Decisions on the arrangement of departments and the resources within these
departments must be made with the objective of enabling given goods or services to be
provided at minimum total costs. The nature of the layout of the system and within the
system will determine the extent of movement, handling, materials flow, etc.
d) The Design of Work and of Jobs
Effective methods of working are essential for the efficient design of an operating
system and some control of work is necessary in order for adequate use of resources
to be achieved and in order for management to determine the times necessary for all
operations.
e) Remuneration System Design
It follows from the above that the operations manager has some direct responsibility
in the operation, if not the design, of the remuneration system, especially where a
payment-by-results scheme is used and where work standards are obtained through,
for example, work measurement or similar calculations.
f) Operations Control
Operations control is the complementary activity to operations and activity scheduling
and, simply stated, involves the implementation of operations schedules.
g) Quality Control and Reliability
h) Maintenance and Replacement
i) Performance Measurement
Some measurement and monitoring of performance within organizations is essential.
Since the operating systems are likely to be a major component of any organization, the
measurement of the performance of such systems is an essential aspect of any total
performance measurement.

8 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 UNIT 2

FORECASTING

Problem: 1
An investigation into the demand for colour TV sets in 5 towns has resulted in the following
data:
Population of the town (in lakhs) X: 5 7 8 11 14
No. of TV sets demanded (in thousands) Y: 9 13 11 15 19
Fit a linear regression of y on X and estimate the demand for CTV sets for two towns with a
population of 10 lakhs and 20 lakhs.

Problem: 2
The annual sales of truck tyres manufactured by a company are as follows –
Year (X) 2002 2003 2004 2005 2006
Sales (‘000 units) (Y) 53 64 86 54 83
Fit a linear trend equation to the sales figures and estimate the sales for 2007.

Problem: 3
From the following time series data of sale project the sales for the next three years.
Year 2001 2002 2003 2004 2005 2006 2007
Sales (‘000 units) 80 90 92 83 94 99 92

Problem: 4
Project the trend of sales for the next 5 years from the following data –
Year 2003 2004 2005 2006 2007
Sales (‘000 units) 120 140 120 150 170

Problem: 5
An investigation into the use of scooters in 5 towns has resulted in the following data:
Population in town
Population in town (in lakhs) (X) 4 6 7 10 13
No. of scooters (Y) 4,400 6,600 5,700 8,000 10,300
Fit a linear regression of Y on X and estimate the number of scooters to be found in a town with
a population of 16 lakhs.
Problem: 6
An investigation into the demand for TV sets in 7 towns has resulted in the following data:
Population (m 000) X: 11 14 14 17 17 21 25
No. of TV sets demand Y: 15 27 27 30 34 38 46
Fit a linear regression of Y on X, and estimate the demand for TV sets for a town with a population
of 30,000.

Problem: 7
An investigation into the demand for inverter in 5 towns has resulted in the following data:
Population of the town (in lakhs) X: 5 7 8 11 14
No. of Inverter demanded Y: 45 65 55 75 95
Fit a linear regression of Y on X, and estimate the demand for Inverter for a town with a population
of 25 lakhs.

Problem: 8
An investigation into the demand for Coolers in 5 towns has resulted in the following data:
Population of the town (in lakhs) X: 4 6 7 10 13
No. of Coolers demanded Y: 40 60 50 70 90
Fit a linear regression of Y on X, and estimate the demand for Coolers for a town with a population
of 20 lakhs.

Problem: 9
With the help of following data project the trend of sales for the next five years:
Years 2002 2003 2004 2005 2006 2007
Sales (in lakhs) 100 110 115 120 135 140

Problem: 10
There exists a relationship between expenditure on research and its annual profit. The details of
the expenditure for the last six years is given below. Estimate the profit when the expenditure is
11 unit
Year 2001 2002 2003 2004 2005 2006 2007
Expenditure for research (X) 2 3 5 4 5 6 11
Annual profit (Y) 20 25 34 30 40 31 ?
(One unit corresponds to 1 Crore Rs.)

Problem: 11
Compute 3-yearly moving average values for the following data:
Year 1997 1998 1999 2000 2001 2002 2003
Value 2 4 6 8 13 12 14

10 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 12
Compute 3-yearly moving averages of the production figures given below and determine the
trend values. Find the short-term fluctuations.

Year Production Year Production

(in ‘000 tonnes) (in ‘000 tonnes)
1990 15 1998 63
1991 21 1999 70
1992 30 2000 74
1993 36 2001 82
1994 42 2002 90
1995 46 2003 95
1996 50 2004 102
1997 56

Problem: 13
Find the trend of the following time series by the method of moving averages (assume a four
yearly cycle.)

Year Value Year Value

1989 53 1996 88
1990 79 1997 80
1991 76 1998 104
1992 66 1999 98
1993 69 2000 96
1994 94 2001 102
1995 105 2002 106

Problem: 14
From the following data, calculate the trend values using 4-yearly moving averages:
Year : 1989 1990 1991 1992 1993 1994 1995 1996 1997
Value : 506 620 1036 673 588 696 1116 738 663

Problem: 15
Obtained the trend values for the following quarterly data by the moving averages method:

Quarters 2002 2003 2004 2005

I 56 66 72 94
II 60 74 86 120
III 71 89 101 137
IV 85 97 115 155

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 11

Problem: 16
Calculate 5-yearly moving averages for the following data:
Year : 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
Value (‘000 Rs.) : 123 140 110 98 104 133 95 105 150 135

Problem: 17
Calculate 5-yearly and 7-yearly moving averages for the following data showing number of
commercial and industrial failures in a country during 1989-2004.

Year No. of Failures Year No. of Failures

1989 23 1997 9
1990 26 1998 13
1991 28 1999 11
1992 32 2000 14
1993 20 2001 12
1994 12 2002 9
1995 12 2003 3
1996 10 2004 1
Also plot the actual and trend values on a graph.

Problem: 18
For the following data verify that five yearly weighted moving average trend values with weights
1,2,2,2,1 respectively is equivalent to 4-yearly centred moving average trend values:
Year : 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Sales : 5 3 7 6 4 8 9 10 8 9 9
(Rs. In lakhs)

Problem: 19
Fit a parabolic trend Y = a + bX + cX2 to the following data, where Y denotes output (in thousand
units):
Year : 1981 1982 1983 1984 1985 1986 1987 1988 1989
Y : 2 6 7 8 10 11 11 10 9
Also compute the trend values. Estimate the value for 1990.

Problem: 20
The production of a commodity during 1993 – 98 is given below. Fit the second degree parabola
to those data and estimate the production for the year 2000:
Year : 1993 1994 1995 1996 1997 1998
Production (‘000 tonnes.) : 10 12 13 15 18 20

12 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 21
The prices of a commodity during 2001 – 2006 are given below. Fit a parabola Y = a + bX + cX2 to
those data. Estimate the price for the year 2007:
Year : 2001 2002 2003 2004 2005 2006
Price (Rs.) : 100 107 128 140 181 192

Problem: 22
A company predicted the sales for product as 150 unit for Feb 2003. Actual demand for Feb 2003
was 158 unit . Using a smoothing constant (∝) of 0.3 , Forecast the demand for March 2003
(Hint : Ft = Ft-1 + ∝ ( At-1 – Ft-1 )

Problem: 23
A restaurant had a demand of 500 sweet dishes in January and 600 sweet dishes in February. So
far the restaurant manger had used average monthly demand for each of the next year. Average
monthly demand for the sweet dish last year was 250. Using 250 sweet dishes as the January
forecast and a smoothing coefficient of 0.8 weight the recent demand and calculate the forecast
for the month of march this year.

Problem: 24
(a) The actual demand for the periods are 1100, 1120, 1400 and 1250 and the operating forecast
for period 1 was 1000. Smoothing coefficient is 0.2. Calculate the new forecast for the five periods.
If the smoothing coefficient is changed to 0.3 before the end of period 3, what would be the new
forecast for period 4?
Solution:
When α = 0.2
Period OF AD AD-OF (AD-OF)α NF
1 1000 1100 +100 +20 1020
2 1020 1000 -20 -4 1016
3 1016 1120 +104 +20.8 1036.8
4 1036.8 1400 +363.2 +72.64 1109.44
5 1109.44 1250 +140.56 +28.11 1137.55

When α =0.3
3 1016 1120 +104 +31.2 1047.2

Problem: 25
The demand for sewing machine was estimated as ‘1000per month for 5 months. Later on the
actual demand was found as 900, 1050, 1000, 1100 and 950, respectively. Workout MAD and
Bais. Analyze whether the forecast made was accurate.

Hint.: MAD =
∑ (Forecasted demand - Actual demand
n

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 13

 CAPACITY PLANNING
AND UTILIZATION

Problem: 1
A department works on 8 hours shift, 250 days a year and has the usage data of a machine, as
given below:

Product Annual demand Processing time

(units) (standard time in hours)
X 300 4.0
Y 400 6.0
Z 500 3.0

Determine the number of machines required.

Problem: 2
A steel plant has a design capacity of 50,000 tons of steel per day, effective capacity of 40,000
tons of steel per day and an actual output of 36,000 tons of steel per day. Compute the efficiency
of the plant and its utilisation.

Problem: 3
An item is produced in a plant having a fixed cost of Rs. 6,000 per month, variable cost of rupees
2 per unit and a selling price of Rs. 7 per unit. Determine
(a) The break-even volume.
(b) If 1000 units are produced and sold in a month, what would be the profit?
(c) How many units should be produced to earn a profit of Rs. 4000 per month?

Problem: 4
A manager has to decide about the number of machines to be purchased. He has three options
i.e., purchasing one, or two or three machines. The data are given below.

Number of machine Annual fixed cost Corresponding range of output

One Rs. 12,000 0 to 300
Two Rs. 15,000 301 to 600
Three Rs. 21,000 601 to 900

Variable cost is Rs.- 20 per unit and revenue is Rs. 50 per unit
(a) Determine the break-even point for each range
(b) If projected demand is between 600 and 650 units how many machines should the
manager purchase?

14 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 5
A firm has four work centres, A, B, C & D, in series with individual capacities in units per day
shown in the figure below.

(i) Identity the bottle neck centre.

(ii) What is the system capacity?
(iii) What is the system efficiency?

Problem: 6
A firm operates 6 days a week on single shift of 8 hours per day basis. There are 10 machines of
the same capacity in the firm. If the machines are utilised for 75 percent of the time at a system
efficiency of 80 percent, what is the rated output in terms of standard hours per week?

Problem: 7
A manufacturing company has a product line consisting of five work stations in series. The
individual workstation capacities are given. The actual output of the line is 500 units per shift.
Calculate (i) System capacity (ii) Efficiency of the production line.

Workstation No. A B C D E
Capacity/Shift 600 650 650 550 600

Problem: 8
The following activities constitute a work cycle.
(i) Find the total time, theoretical output obtained from the machine.
(ii) Calculate the number of machines required to produce the three components from the
information given below if working hrs 8 hrs and 25 days in a month

Sr. No. Activity Time (min)

1. Unloading 0.25
2. Inspection 0.35
3. Loading job on machine table 0.40
4. Machine operation time 0.90

Sr. No. Components A B C

1. Setup time per batch 25 min 55 min 45 min
2. Operation time (min/piece) 1.75 3.0 2.1
3. 3. Batch size 350 550 575
4. 4. Production per month 2450 4400 2875

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 15

Problem: 9
Three components are to be manufactured on three machines i.e. Centre lathe, Milling machines
and Cylindrical grinding machine.
(i) Calculate the number of machines required of each kind to produce the components if
the plant works for 48 hours per week.
(ii) Calculate the number of machines required assuming the machine efficiency of 75%.
(iii) How do you reduce the number of machines. The following information is given:

Machine Component A Component B Component C

Setup Operation Setup Operation Setup Operation
1. Center lathe 30 min 2 min 55 min 2.5 min 40 min 1.5 min
2. Milling machine 45 min 8 min 30 min 4 min – –
3. Cylindrical grinding 50 min 8 min 60 min 8 min 60 min 10 min
Others
Lot size 350 400 600
Quantity demand/ 1750 4000 3000
month

Problem: 10

Particulars Machine A Machine B

Investment Rs. 75,000 Rs. 80,000
Interest on Capital invested 10% 15%
Hourly charge (wage Rs. 10 Rs.8
Pieces produced per hour 5 8
Annual operating hours 2000 2000

Machine will give the lower cost per unit of production, if run for the whole year? If only 4000
pieces are to be produced in a year, which machine would give the lower cost per piece.

Problem: 11
Machine A and B are both capable of manufacturing a product. They compare as follows:

Machine A Machine B
Investment Rs. 50,000/- Rs. 80,000/-
Interest on capital invested 15% per annum 15% per annum
Hourly charges (Wages + Power) Rs. 10/- Rs. 8/-
No. of pieces produced per hour 5 8
Annual operating hours 2,000 2,000

16 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 (i) Which machine will have the lower cost per unit of output, if run for the whole year?
(ii) If only 4000 pieces are to be produced in a year, which machine would have the lower
cost per piece?
(iii) Will your answer to (i) above vary if you informed that 12.5% of the output of machine
B gets rejected at the inspection stage. If so, what would be the new solution?

Problem: 12
Methods P and Q are both capable of manufacturing a product. They compare as follows:

Data Method P Method Q

Fixture - cost Rs. 24,000/- Rs. 16,000/-
-life 6 months 4 months
Tooling -cost Rs. 2,500/- Rs. 4,800/-
-life 300 pieces 500 pieces
Processing time per piece 6mts 4 mts

The annual requirement is 1500 nos. Operating cost per hour of the process is Rs.128 for both
processes. Material cost is same in each case.
Which method would you choose for production during a period of one year?

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 17

 ECONOMIC BATCH QUANTITY

Determination of Economic Lot Size for Manufacturing

The factors to be considered in arriving at the economic lot size are:
(i) Usage rate:- The rate of production of parts should match with the rate of usage of
these parts in the assembly line.
(ii) Manufacturing cost:- High the lot size, lower will be the cost per unit produced because
of distribution of set up costs for setting up production or machines and preparing paper
work (production orders). But the carrying cost (handling and storing costs) will increase
with increase in lot size.
(iii) Cost of deterioration and obsolescence:- Higher the lot size, higher will be the possibility
of loss due to deterioration (items deteriorating after self life) or obsolescence (due to
change in technology or change in product design).

Economic Batch Quantity (EBQ)

Or Economic Lot Size (ELS)
Or Economic Manufacturing Quantity (EMQ)
2AC 2 × Anual demand (inunits) × Set upCost (per set up)
= =
CI Pr oductinCost per unit × InventoryConveyingCh arg es (percentage)

Economic Run Length:-

When a firm is producing an item and keeping it in inventory for later use instead of buying it, the
formula used to calculate economic order quantity (EOQ) can be used to calculate the economic
production quantity referred to as economic run length (ERL).
If ‘P’ is the production rate and ‘d’ is the demand rate (or consumption rate), A is the annual
demand for the item in units, I is the inventory carrying charges (percentage), C is the production
cost per unit, then,
2AS
Economic Run Length (ERL) =
CI ( 1 − d p)

2 × ( Anual demand (inunits)) × Set upCost (per set up)

=
 Pr oductinCost   InventoryConveyingCh arg es   Demand Rate 
  ×  1− 
 (per unit )   (percentage)   Pr oductionRate 

18 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 PRACTICAL PROBLEM
Problem: 1
C Ltd. produces a product which has a monthly demand of 4,000 units. The product requires a
component X which is purchased at Rs. 20. For every finished product, one unit of component is
required. The ordering cost is Rs. 120 per order and the holding cost is 10% p.a.
(i) Economic order quantity.
(ii) If the minimum lot size to be supplied is 4,000 units, what is the extra cost the company
has to incur?
(iii) What is the minimum carrying cost the company has to incur?

Problem: 2
M/s Kobo Bearing Ltd. is committed to supply 24,000 bearing per annum to M/s Deluxe fans on
a steady daily basis. It is estimated that it costs 10 paisa as inventory holding cost bearing per
month and that setup cost per run of bearing manufacture is Rs. 324.
(a) What is the optimum run size for bearing manufacture?
(b) What should be the interval between the consecutive optimum runs?
(c) Find out the minimum inventory holding cost.

Problem: 3
A manufacturer requires 10,00,000 components for use during the next year which is assumed to
consist of 250 working days. The cost of storing one component for one year is Rs. 4 and the cost
of placing order is Rs. 32.
There must always be a safety stock equal to two working days usage and the lead time from
the supplier, which has been guaranteed, will be five working days throughout the year. Assuming
that usage takes place steadily throughout the working days, delivery takes place at the end of
the day and orders are placed at the end of working day, you are required to
(a) Calculate the EOQ
(b) Calculate the Re – order point

Problem: 4
The monthly requirement of raw material for a company is 3,000 units. The carrying cost is
estimated to be 20% of the purchase price per unit, in addition to Rs. 2 per unit. The purchase
price of raw material is Rs. 20 per unit. The ordering cost is Rs. 25 per order.
(i) You are required to find EOQ.
(ii) What is the total cost when the company gets a concession of 5% on the purchase price
if it orders 3,000 units or more but less than 6,000 units per month.
(iii) What happens when the company gets a concession of 10% on the purchase price when
it orders 6,000 units or more?
(iv) Which of the above three ways of orders the company should adopt?

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 19

 PLANT LAYOUT

Plant Layout also known as layout of facility refers to the configuration of departments work-
centres and equipment and machinery with focus on the flow of materials or work through the
production system.
Plant layout or facility layout means planning for location of all machines equipments utilities
work stations customers service areas material storage areas tool servicing areas tool cribs aisles
rest rooms lunch rooms coffee / tea bays offices and computer rooms and also planning for the
patterns of flow of materials and people around into and within the buildings. Layout planning
involves decisions about the physical arrangement of economic activity centres within a facility.
The questions to be addressed in layout planning are:
• How much space and capacity does each centre need?
• How should each center’s space be configured?
• What centres should the layout include?
• Where should each centre be located?
The location of a centre has two dimensions:
• Absolute location or the particular space that the centre occupies within the facility.
• Relative location i.e., the placement of a centre relative to other centres.

The importance of layout decisions:

The need for layout planning arises both in the process of designing new plants and the redesigning
existing plants or facilities.
Most common reasons for design of new layouts are:
(i) Layout is one of the key decisions that determine the long-run efficiency in operations.
(ii) Layout has many strategic implications because it establishes an organisation’s
competitive priorities in regard to capacity, process flexibility and cost as well as quality
of work life customer contact and image (in case of service organisations).
(iii) An effective layout can help an organisation to achieve a strategic advantage that
supports differentiation low cost fast response or flexibility.
(iv) A well designed layout provides an economic layout that will meet the firm’s competitive
requirements.

Need for redesign of layout arises because of the following reasons:

• Accidents, health hazards and low safety,
• Changes in environmental or legal requirements.
• Changes in processes methods or equipments,
• Changes in product design/service design.
• Changes in volume of output or product-mix changes.
• Inefficient operations (high cost bottleneck operations).
• Introduction of new products/services
• Low employee morale.

20 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Good Plant layout – Objectives:
• Efficient utilization of labour reduced idle time of labour and equipments,
• Higher flexibility (to change the layout easily).
• Higher utilization of space equipment and people (employees).
• Improved employee morale and safe working conditions.
• Improved flow of materials information and people (employees)
• Improved production capacity,
• Reduced congestion or reduced bottleneck centres.
• Reduced health hazards and accidents.
• Reduced material handling costs.
Factors influencing layout choices:
Primarily the layout of a plant is influenced by the relationship among material machinery and
men. Other factors influencing layout are type of product type of workers the type of industry
management policies etc.
Some of these factors are discussed in detailed below:
• Location:- the size and type of the site selected for the plant influences the type of
buildings (single story or multi story) which in turn influences the layout design. Also
the location of the plant determines the mode of transportation from and into the plant
(such as by goods trains truck or ships) and the layout should provide facilities for mode
or transport used.
• Machinery and Equipments:- The type of product the volume of production type of
processes and management policy on technology determines the type of machines and
equipments to be installed which in turn influence the plant layout.
• Managerial Policies:- Regarding volume of production provision for future expansion
extent of automation make or buy decisions speed of delivery of goods to customers
purchasing and inventory Policies and personnel policies influence the plant layout
design.
• Materials:- Plant layout includes provision for storage and handling of raw materials
supplies and components used in production. The type of storage areas racks handling
equipments such as cranes trolleys conveyors or pipelines etc. used all depend on the
type of materials used such as solid liquid light heavy bulky big small etc.
• Product:- The type of product i.e. whether the product is light or heavy big or
small liquid or solid etc. it influences the type of layout. For example Ship building
Aircraft assembly Locomotive assembly etc., requires a layout type different from that
needed to produce refrigerators cars scooters television sets soaps detergents soft
drinks etc.
• Workers:- The gender of employees (men or women) the position of employees while
working (i.e. standing or sitting) employee facilities needed such as locker rooms, rest
rooms, toilets, canteens, coffee/tea days etc., are to be considered while designing the
plant layouts.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 21

Plant layout Principles:-
The layout selected in conformity with layout principles should be an ideal one. These principles
are:-
• Principle of Minimum Travel:- Men and materials should travel the shortest distance
between operations so as to avoid waste of labour and time and minimize the cost of
materials handling.
• Principle of Sequence:- Machinery and operations should be arranged in a sequential
order. This principle is best achieved in product layout and efforts should be made to
have it adopted in the process layout.
• Principle of Usage:- Every unit of available space should be effectively utilized. The
principle should receive top consideration in towns and cities where land is costly.
• Principle of Compactness:- There should be a harmonious fusion of all the relevant
factors so that the final layout looks well integrated and compact.
• Principle of Safety and Satisfaction:- The layout should contain built in provisions for
safety for the workmen. It should also be planned on the basis of the comfort and
convenience of the workmen so that they feel satisfied.
• Principle of Flexibility:- The layout should permit revisions with the least difficulty and
at minimum cost.
• Principle of Minimum Investment:- The layout should result in savings in fixed capital
investment not by avoiding installation of the necessary facilities but by an intensive use
of available facilities.

Types of Layout:- The type of layout are:-

(i) Process layout or functional layout or job shop layout; (ii) Product layout or line processing
layout or flow-line layout; (iii) Fixed position layout or static layout; (iv) Cellular manufacturing
(CM) layout or group technology layout and (v) Combination layout or Hybrid layout.

Process Layout:-
It is also called the functional layout, layout for job lot manufacture or batch production layout the
process layout involves a grouping together of similar machines in one department. For example
machines performing drilling operations are installed in the drilling department; machines
performing turning operations are grouped in the turning department and so on.
While grouping machines according to the process type certain principles must be kept in
mind. These are:
• Convenience for inspection.
• Convenience for supervision. Process layout may be advantageously used in light and
heavy engineering industries made-to-order furniture industries and the like.
• The distance between departments needs to be as short as possible with a view to
avoiding long-distance movement of materials.
• Though similar machines are grouped in one department the department themselves
should be located in accordance with the principle of sequence of operation. For
example in a steel plant the operations are smelting casting rolling etc. these different
departments may be arranged in that order to avoid crossovers and backtracking of
materials

22 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Product Layout:-
It is also called the straight line layout or layout for serialized manufacture the product layout
involves the arrangement of machines in one line depending upon the sequence of operations.
Material is fed into the first machine and finished products come out of the last machine.
In product layout if there is more than one line of production there are as many lines of machines.
The emphasis here therefore is on special purpose machines in contrast to general purpose
machines which are installed in the process layout.
The grouping of machines should be done on product line keeping in mind the following principles:
• All the machine tools or other types of equipment must be placed at the pint demanded
by the sequence of operations.
• All the operations including assembly testing and packing should be included in the line.
• Materials may be fed where they are required for assembly but not necessarily all at one
point and
• There should be no points where one line crosses another line;

Layout in the form of fixed position:

As the term itself implies the fixed position layout involves the movement of men and machines
to the product which remains stationary. In this type of layout the material or major component
remains in a fixed location and tools machinery and men as well as other pieces of material are
brought to this location.
It is also called static layout this type is followed in the manufacture if bulky and heavy products
such as locomotives ships boilers air crafts and generators.

Layout of Service Facility:

The fundamental difference between service facility and manufacturing facility layouts is that
many service facilities exits to bring together customers and service facility layouts should provide
for easy entrance to these facilities from freeways and busy thoroughfares. Large well organized
and amply lighted parking areas and well designed walkways to and from parking areas are some
of the requirements of service facility layouts.

Importance of layout:-
The importance of a layout can be described as under:
• Avoidance of Bottlenecks:- Bottlenecks refer to any place in a production process where
materials tend to pile up or produced at rates of speed less rapid than the previous
or subsequent operation. Bottlenecks are caused by inadequate machine capacity
inadequate storage space or low speed on the part of the operation. The results of
bottlenecks are delays in production schedules congestion, accidents and wastage of
floor area. All these may be overcome with an efficient layout.
• Avoidance of Unnecessary and costly changes:- A planned layout avoids frequent
changes which are difficult and costly. The incorporation of flexibility elements in the
layout would help in the avoidance of revisions.
• Better Production Control:- Production control is concerned with the production of a
product of the right type at the right time and at reasonable cost. A good plant layout
is a requisite of good production control and provides the plant control officers with a
systematic basis upon which to build organisation and procedures.
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 23
 • Better supervision:- A good plant layout ensures better supervision in two ways:
(a) Determining the number of workers to be handled by a supervisor and (b) Enabling
the supervisor to get a full view of the entire plant at one glance. A good plant layout is
therefore, the first step in good supervision.
• Economics in handling:- Nearly 30 percent to 40 percent of the manufacturing costs
are accounted for by materials handling. Every effort should therefore be made to cut
down en this cost. Long distance movements should be avoided and specific handling
operations must he eliminated.
• Effective use of available are:- Every unit of the plant area is valuable especially in urban
areas. Efforts should be therefore be made to make use of the available area by planning
the layout properly.
• Improve employee Morale:- Employee morale is achieved when workers are cheerful
and confident. This state of mental condition is vital to the success jof any organisation.
Morale depends on better working conditions better employee facilities reduced
number of accidents and increased earnings.
• Improved quality control:- Timely execution of orders will be meaningful when the
quality of output is not below expectations. To ensure quality inspection should be
conducted at different stages of manufacture. An ideal layout provides for inspection to
ensure better quality control.
• Improved utilization of labour:- A good plant layout is one of the factors in effective
utilization of labour. It makes possible individual operations the process and flow of
materials handling in such a way that the time of each worker is effectively spent on
productive operations.
• Minimisation of production delays:- Repeat order and new customers will be the result
of prompt execution of orders. Every management should try to keep to the delivery
schedules.
• Minimum equipment investment:- Investment on equipment can be minimized by
planned machine balance and location minimum handling distances by the installation
of general purpose machines and by planned machine loading. A good plant layout
provides all these advantages.

Good layout - Characteristics of good layout

• Effective coordination and integration among men materials and machinery to maximize
utilization and output.
• Facilitates supervision and control.
• Flexibility for change of layout expansion changes in product design and process.
• Good working conditions–lighting ventilation temperature humidity etc., are as per
requirements.
• Maximum utilization of available space.
• Proper location of storage areas.
• Provision of safety and reduction of accidents.
• Smooth movement of men materials machinery from place to place.

24 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Material Handling System:-
Material handling is an integral part of manufacturing process. In order to manufacture any
product it is essential to move the material from one place to that of another. Materials must
be turned moved and positioned on the respective machines to produce the required output.
Materials must also be inevitably move from one machine to another. Though operators can
be employed to move the materials the common practice is to move the materials from one
processing area to another and from one department to another.
The primary objective of materials handling is to improve production performance by speeding
up material flow. Lower unit cost of production less work in progress reduced labour costs of
handling materials better utilization of shop floor and warehouse fewer breakages reduced
fatigue of operatives and other shop floor personnel better facilities and reduced accidents
improved product quality better customer service and general safety are the other objectives of
the material handling system. The objectives therefore can be:
• Improvement of production performance and reduction of costs.
• Improvement of conditions for shop floor personnel.

These are discussed as under:

• Better control of the flow of goods:- Effective materials handling system results in better
control of the flow of goods.
• Higher productivity at lower manufacturing cost:- The material handling system in any
manufacturing organisation should be primarily designed to improve productivity and
avoid inordinate delays in furnishing the required materials at the manufacturing place.
The fastest most efficient and economical movement of materials results in higher
productivity at lower manufacturing cost.
• Improved working conditions and greater safety in the movement of materials:- The
manufacturing organisations are required to follow the safe handling practices. Safe
handling of materials limits the cases of industrial accidents and employees feel safe
and secure to work in manufacturing units.
• Increased storage capacity:- Scientific movement and storage of materials result in the
effective utilization of available storage space.
• Lower the unit materials handling costs:- It is quite obvious that the overall materials
handling costs will be reduced if the unit costs are reduced.
• Provide for fewer rejects:- Careful handling of the product will contribute to a better
quality level of the goods produced. Ineffective handling of materials results in breakage
and damage to the goods produced. Production of defective pieces acts as a major cost
to manufactures.
• Reduce the manufacture cycle time:- Through effective handling of materials the total
time required to make a product move from the receipt of raw materials to the finished
goods. Movement of materials con be speeded up or may be handled over shorter
distances. Substantial reduction of the manufacturing cycle time will eventually reduce
the inventory costs and the other production costs incident thereto.

Principles of Material Handling:-

Materials handling is a service function; it is not an end in itself. The principles of materials
handling can be grouped under three broad headings:

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 25

 • Principles relating to the elimination of wasteful methods,
• Principles relating to the laying out the plant,
• Principles relating to the selection and application of materials handling equipment,

Principles of Material Handling

Related to Planning Related to Equipment Related to Operations

Planning Principle Machanisation / Control principle

Systems Principle Automation Principle Capacity principle
Material flow Principle Equipment selection Principle Performance principle
Simplification Principle Flexibility principle
Gravity Principle Dead weight Principle
Space Utilisation Principle Motion principle
Safety Principle Idle time principle
Maintenance principle
Obsolescence principle

Wasteful methods can be eliminated by following the undermentioned principles.

• Avoiding the unnecessary transfer of materials from floor to workplace or from container
to container
• Eliminating unnecessary mixing and subsequent storing,
• Increasing the speed of handling the materials
• Utilizing gravity as a moving force wherever practicable.
• Introduction of automaticity into the materials handlings of materials,
• Reducing to a minimum the number of handlings of materials,
• Using mechanical aids to eliminate the use of hand labour in the movement of materials.

Various types of materials handling equipment used in manufacturing organisations:

Materials handling requires some equipment especially designed to meet the requirements of
handling different materials.
The main types of equipment can be conveniently classified under the following heads:-
• Aerial ropeways and cable-ways.
• Conveyors.
• Hoists and lifts
• Cranes: Actually it is very difficult to precisely define cranes as they shade in one direction
into hoists and in the other direction into conveyors. Several possible could be:
(i) Portable or mobile
(ii) Fixed track Travelling
(iii) Fixed
(iv) Other sub-types including the job Gantry Bridge and derrick.
• Pallet handling trucks and pallets.
• Earth moving equipment.
26 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
Factors affecting the selection of materials handling equipment:
The primary objective of employing the materials handling equipment is to arrive at the lowest
cost per unit of material handled.
The factors to be taken into account while employing the equipment for handling the materials
includes:
• Adaptability:- The load-carrying and movement characteristics of the equipment
elected should fit the materials handling problem.
• Cost: The most important factor in the selection of materials handling equipment is the
cost of the equipment. The cost must not be prohibitive; rather it should be reasonable.
• Ease of maintenance:- The maintenance of equipment selected and purchased at
reasonable cost is another important factor.
• Environment:- Equipment selected must conform to the environmental requirements of
an organisation.
• Flexibility:- It is better if the equipment selected is flexible enough to handle more than
one type of material.
• Power:- Enough power should be available to do the job.
• Space requirements:- While selecting the equipment space required to install shall have
to be taken into account.
• Speed:- Within the limits of the production process of plant safely materials must be
moved at a reasonable speed.
• Supervision:- Depending on the degree of automaticity supervision must be exercised
on the machines installed to handle the materials.
• The load capacity:- The load capacity of the selected equipment must be adequate
enough to perform the job effectively. However the equipment should not be too heavy
and result in excessive operating costs.

Classification of industries based on production

Type of Industry :
The type of industry and the method of the manufacturing process exercise a significant influence
on plant layout.
Industries in this context may be broadly classified into four types:
(a) Synthetic,
(b) Analytical,
(c) Conditioning; and
(d) Extractive.

Extractive industries :- It is involving the separation of one element from another, as in the
case of metal form the ore.
Air conditioning industry involves a change in the physical properties. Metal working industries,
foundries and leather tanning concerns condition their raw materials to have the end products.
An oil refinery, for example, yields naphtha, gasoline, paraffin, tar and kerosene. Similarly, a sugar
mill gives, besides sugar, and molasses.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 27

 Synthetic :- It is also called assembling industry and involves the production of a product by
the use of various elements. The chemical industries and paper industries are synthetic industries.
Light and heavy engineering and watch making industries , in which several components are
assembled to get the final products, also synthetic industries
Each of the above types of industries may be further classified into two types, namely:
(a) Intermittent industries; and
(b) Continuous industries.
This classification is based on the method of manufacture. The former type of industries
manufactures different components on different machines and assembles them to get the end
products.
Intermittent production system situations are those where the facilities must be flexible
enough to handle a wide variety of products and sizes or where the basic nature of activity
imposes change of important characteristics the input (change in product design). Under this
system no single sequence of operations is appropriate and therefore standardized materials or
machines cannot be used. Under this type of manufacturing, production is done in lots rather
that on a continuous flow basis. It is done more often on the basis of customer orders.
The chief characteristics of intermittent industries are that components are made for inventory
but they are combined differently for different customers. The finished product is heterogeneous
but within a range of standardized options assembled, by the producers. Since production is
partly for stock and partly for customer demand, there are problems to be met in scheduling,
forecasting, control and coordination.

Examples of such industries are automobile industry, electrical goods manufacturing plants,
printing presses etc.
Intermittent system of production may further be divided into two types, namely (a) job and
(b) batch production.
(a) Job Production - In this system, goods are produced according to the orders of the
customers. Continuous demand of such items is hot assured and therefore production
is done only when the orders for the manufacturing of items are produced from the
customers.
(b) Batch Production - Under this system, the manufacturing is done in batches or groups
or lots either on the basis of customer’s order or with a hope of a continuous demand
of the product. Under this system, medium scale production is warranted.

In batch production, machines and equipment are made available for the next batch as soon as
the production of first batch is completed.
Continuous industries uninterruptedly produce one or two products of a standardize nature.
It is needless to emphasis that the layout designer should keep in mind the type of industry and
the method of the manufacturing process while Planning a layout.
Continuous production situations are those where facilities are standardized as to routing and
flow since the raw material or inputs are standardized. Therefore, a standard set of processes and
sequences of processes are adopted. Such processes are adopted by concerns which produce
goods or services continuously by putting them through a series of successive connected
operations in anticipation of customer demand rather than in response to customer orders.
Examples of industries using such technology are petroleum, chemicals, steel and sugar
industry.
28 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
Classification of the continuous industries into (1) Mass production system and (2) Process
production system.
(a) Mass Production - This system of production is used by concerns where manufacturing
is carried on continuously in anticipation of demand, though demand of the product may
not be uniform throughout the year. Standardization is the keynote of mass production.
Standardized raw materials and machines are used to produce standardized products
through standardized process of production.
(b) Process Production - This system is an extended form of mass production where
production is carried on continuously through, a uniform predetermined sequence of
operations. Generally under this system finished product of one process is used in the
next process as a raw material till the last process.
Process production calls for the setting up of automatic machines and equipment as far as
possible. Large industries like petroleum refining, heavy chemical industries generally use this
system of production.

Technological Aspects of Different Production Process Like Power,

Pollution Control & Recovery Process
Power:
This is an important factor in the industry and can provide the competitive edge. From the days of
a hefty power consumption of 140 units per tonne of cement, the consumption is about 90-100
units.
Availability of power is another problem and almost all companies have gone in for massive
power generating sets to improve their working.

Recovery Process - Waste Management:

There are various ways in which one could categorise waste. However, the generally accepted
classification is given below:
(i) Classification on the basis of Resources, i.e., how much of a particular resource has
been wasted.
(ii) Classification on the basis of property i.e. whether the materials that have been wasted
are hazardous to life and environment or whether they fall in the category of non-
hazardous.
(iii) Classification on the basis of the recoverability of resources.
(iv) Classification on the basis of origin of waste, i.e., whether it is commercial waste or
industrial waste, residential waste or office waste and construction waste or agricultural
waste.

The chief objectives of waste management are as follows:

• Minimisation of overall waste in any operating system under scrutiny.
• aximisation of previous resources, so that these are not frittered away and the
opportunity cost is bare minimum.
• To cut down on all the unnecessary activities which do not add value to the system.
• To increase the profitability of the operation followed by different organisations.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 29

 • To inculcate a sense of cost-effectiveness which could trigger off the prudent practices
of Total Cost Management (TCM).
• To follow the ethics and the principles of Total Quality Management (TQM).
• To aspire for international recognition, vital to face the competition prevailing in the
current global as well as the domestic market.

Attributes of effective waste collection system:

An efficient waste collection system serves the organization in more ways than one. It may be
extremely costly to install and operate, but once handled properly, provides substantial savings
to the organization by providing the operating costs and other overheads. The structure of an
effective waste collection system depends on the following key factors.
1. Identify the waste.
2. Waste-separation at source.
3. Decide about the quantity to be stored in a particular container.
4. Decide about the physical dimensions other important attributes of the container.
5. Collect the waste in these containers.
6. Make projections of the rate of waste generation.
7. Depending on the above, ensure that the waste collection is timely and proper without
any delays or bottlenecks.
8. Induce some kind of benefits—whether monetary inducements or otherwise to the
employees collecting the waste at source.
9. Motivational and other techniques can be effectively used to achieve the above defined
result.
10. Make provisions to transport the waste so collected to the salvage industry or the
localised unit, as the case may be.
11. Collect the available organic wastes.
12. Ensure that the inorganic wastes are not left behind.
13. Clearly differentiate between the different types of waste.
14. Handling each container on the basis of the waste-type stored in these.
15. Keep an emergency or contingency plan ready.

Recycling of Wastes
Often the waste generated across the industries can be recycled and used again and again.
However, it is not as simple as it appears to be. Certain appropriate recycling projects have to be
created to achieve such results.

Features of waste disposal system:

The salient features of an effective waste proposal system are as follows:
1. Easy to install and operate.
2. Economical from the cash outflow point of view.
3. Convenient and not highly complex.
4. Within the budgetary constraints.
5. Approved by the legislation and other statutory authorities in force.
30 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
 6. Flexibility and not rigidity in operations.
7. Economies of scale.
8. Does not require highly skilled labour force for its operation.
9. Adaptability in the context of the needs and objectives of the organization.

Pollution Control:
Pollution can be of four types, on the basis of the forms:
(i) Solid – type , (ii) Liquid – type, (iii) Gaseous pollutants, (iv) Hybrid-type, .

Definition and Meaning of Noise-Pollution:-

Noise may be defined as an unwelcome, unpleasant, unwanted and unavoidable sound. For
example it can be classified as under:
Unpleasant Noise:- Sources of such noise are, predominantly:
(i) Industrial outlets.
(ii) Increased automation.
(iii) Lack of work culture.
(iv) Lack of awareness.
(v) No concern for the environmental and other allied issues.
Unavoidable Noise:- Unavoidable noise is a part and parcel of our daily life. We simply cannot
escape from it. It is one of the prices one has to pay foil modern living.
These are from:
(i) Regular sources.
(ii) Work-places/stations.
(iii) Use of machines.
(iv) Limited and restricted choices.
Other types could be vibration. People exposed to it for longer periods are likely to suffer from
fatigue and exhaustion – which may prove to be quite costly in the long run.

Objectives of Pollution Control

Although the main aims of pollution control are simple enough, i.e. “to make the world a better
place to live in”, the sub-objectives and the strategies adopted for this purpose are given below:
1. Environmental preservance.
2. Ecological balance.
3. Dignity of life for all and sundry.
4. Protection from physical diseases.
5. Protection and prevention from mental impairment.
6. To maintain the right balance between the nature’s bountiful resources and to protect
them.
7. To increase the life expectancy.
8. To enjoy a stress-free high quality existence.
9. To increase the employees productivity.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 31

 10. To boost up the organizational growth at the micro level.
11. To felicitate nations to be more competitive at a macro level.
12. To integrate and synthesize the world as one at the global level.

Control of pollution : Pollution cannot effectively be controlled by the use of a single technique.
Since the causes and the effects of different types of pollution are diverse and distinct from each
other, there cannot be any thumb- rule or golden rule which could be applied in the present
context. However, in general, a prudent use of the techniques given below, in conjunction with
other appropriate measures, is bound to bring in the desired results. These are:
1. Controlling at source.
2. Controlling during processes, operations and other activities.
3. Control by suitable enclosures.
4. Control by protection.
5. Control by preventions.
6. Control by absorption.
7. Adhering to regulations laid down by the following authorities:
(a) Respective state governments.
(b) Central Government.
(c) Guidelines issued by the global bodies representing individual pollution control
measures.
(d) Ensuring compliance with any other law for the time being in force.

32 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 PRACTICAL PROBLEMS
Problems: 1
A company is playing to undertake the production of material testing equipments has to decide
on the location of the plant. Three locations are being considered, namely, A, B and C. The fixed
costs of three locations are estimated to be Rs. 300 Lakhs, 500 Lakhs and 250 Lakhs respectively.
The variable costs are Rs. 3000, Rs. 2000 and Rs. 3500 per unit respectively. The average sales
price of the equipment is Rs. 7000 per unit. Find
(i) The range of annual production / sales volume for which each location is most suitable.
(ii) select the best location, if sales volume is of 18,000 units.

Problem: 2
The present layout is shown in the figure. The manager of the department is intending to
interchange the departments C and F in the present layout. The handing frequencies between the
departments is given. All the departments are of the same size and configuration. The material
handing cost per unit length travel between departments is same. What will be the effect of
interchange of interchange of departments C and F in the layout?

A C E
B D F

Frequency
From / To A B C D E F
A - 0 90 160 50 0
B - - 70 0 100 130
C - - - 20 0 0
D - - - - 180 10
E - - - - 40
F - - - - - -

Distance
From / To A B C D E F
A 1 1 2 2 3
B 2 1 3 2
C 1 1 2
D 2 1
E 1
F -

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 33

Problem: 3
A defence contractor is evaluating its machine shops current process layout. The figure below
shows the current layout and the table shows the trip matrix for the facility. Health and safety
regulations require departments E and F to remain at their current positions.

E B F
A C D

Current layout

From / To A B C D E F
A 8 3 9 5
B 3
C - 8 9
D - 3
E - 3
F -

Can layout be improved? Also evaluate using load distance (Id) score.

Problem: 4
Location A would result in annual fixed cost of Rs. 3,00,000 variable costs of Rs. 63 per unit and
revenue Rs. 68 per unit. Annual fixed cost at Location B are Rs. 8,00,000 variable costs are Rs.
32 per unit and revenues are Rs. 68 per unit. Sales volume is estimated to be 25000 units / year,
which location is attractive?

Problem: 5
A manufacturer is considering four locations for a new plant. It has attempted to study all costs
at the various locations and find that the costs of the following items vary from one location to
another. The firm will finance the new plant from deposits bearing 10 percent interest.

A B C D
Labour (Rs. per unit) 0.75 1.10 0.80 0.90
Plant (Rs. crores) 0.46 0.39 0.40 0.48
Materials & equipment (Rs. per unit) 0.43 0.60 0.40 0.55
Electricity (per year) (Rs.) 30.00 26.00 30.00 28.00
Water (per year) (Rs.) 7.00 6.00 7.00 7.00
Transportation (per unit) (Rs.) 0.02 0.10 0.10 0.05
Taxes (Per year) (Rs.) 33.00 28.00 63.00 35.00

This cost includes a projected depreciation, but no interest.

Determine the most suitable location (economically) for output volumes in the range of 50,000
to 1,30,000 units per year.

34 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Solution:-

Costs A B C D
Fixed Cost (per year):
10% of investment 4,60,000 3,90,000 4,00,000 4,80,000
Electricity 30,000 26,000 30,000 28,000
Water 7,000 6,000 7,000 7,000
Taxes 33,000 28,000 63,000 35,000
Total Fixed Cost 5,30,000 4,50,000 5,00,000 5,50,000
Variable Cost:
Labour 0.75 1.10 0.80 0.90
Material & equipment 0.43 0.60 0.40 0.55
Transportation 0.02 0.10 0.10 0.05
Total Variable Cost (per unit) 1.20 1.80 1.30 1.50
Total Cost: 5,30,000 4,50,000 5,00,000 5,50,000
+1.2 / unit +1.8 / unit +1.3 / unit 1.5 / unit

The point for a plant plans location break-even analysis chart are as follows:
At zero unit of output, use fixed cost values. At 100000 units of output:
A = 6,50,000; B = 6,30,000; D = 7,000,000.

Problems: 6
Mr. X, the factory Manager of S.K. Industries, is considering of departments 3 and 6 in the
present layout. The present layout and the interdepartmental materials handing frequencies are
furnished below: [All the departments are of the same size and configuration in the following
matrix, respectively.]

1 3 5
2 4 6

Present Layout
Weekly frequencies of interdepartmental Material handling
From / To 1 2 3 4 5 6
1 - 0 90 160 50 6
2 - - 70 0 100 130
3 - - - 20 0 0
4 - - - - 180 10
5 - - - - 40

The per unit length inter departmental cost of materials handling are equal. What is the effect of
the interchange of the departments 3 and 6 in the layout?

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 35

Problem: 7
A company planning, to manufacture a household cooking range, has to decide on the location
of the plant. Three locations are being considered viz, patna, Ranchi, and Dhanbad. The fixed
costs of the three locations are estimated to be Rs. 30 lakh, 50 Lakhs and 25 lakh per annum
respectively. Variable Cost Per unit Rs. 300, RS. 200 and Rs. 350.
The expected sales prices of the cooking range is Rs. 700 per unit find out
(i) the range of annual production / sales volume for which each location is the most
suitable and
(ii) Which one of the three locations is the best location at a production / sales volume
18,000 units?

Problems: 8
Find an improved layout for the initial layout given in figure by using CRAFT pair wise exchange
technique. The interdepartmental flows are also furnished along with the interdepartmental cost
matrix.
       1         1        1

A B C

Initial Layout

Cost Matrix

From    A B C
To
A 1 1
B 1 1
C 1 1

Flow Matrix Distance Matrix

From   A B C From   A B C
To To
A 1 2 A 1 2
B 1 3 B 1 1
C 3 3 C 2 1

Problem: 9
A media company proposes to build a new office in one of the three locations .Using data below,
determine the best location . please assume the following values:
(Excellent = 10 , very good =8 good = 6 fair = 4 and poor = 2)

36 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 Rating factor location 1 location 2 location 3 weight
A living std. excellent good fair 30
B labour relation good fair Excellent 10
C govt.aid v. good good poor 5
D schooling system fair excellent good 15
E distance to customer v. good poor excellent 10
F distance to supplier poor good v. good 10
G revenue cont. v. good excellent good 20

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 37

 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 be fixed
for the planning period. Therefore, fluctuations in demand must be met by varying labour and
inventory schedule. Aggregate planning seeks the best combination to minimise costs.
Production planning in the intermediate range of time is termed as ‘Aggregate Planning’. It
is thus called because the demand on facilities and available capacities is specified in aggregate
quantities.
For example
Aggregate quantities of number of Automobile vehicles, Aggregate number of soaps etc.

The planning process is normally divided in three categories.

(i) Long range Planning which deals with strategic decisions such as purchase of facilities,
introduction of new products, processes etc.
(ii) Short term planning which deals with day-to-day work, scheduling and sometimes
inventory problems.
(iii) Intermediate Planning or Aggregate Planning, which is in between long range and short
term planning, which is concerned in generally acceptable planning taking the load on
hand and the facilities available into considerations.

In aggregate planning the management formulates a general strategy by which capacity can be
made to satisfy demand in a most economical way during a specific moderate time period, say
for one year.
The aggregate planning is made operational through a master schedule that gives the
manufacturing schedule (Products and dates of manufacture). Generally, day-to-day schedules
are prepared from master schedule.
Facility planning and scheduling has got very close relationship with aggregate planning.

Aggregate Planning Strategies

Vary the size of the workforce: Output is controlled by hiring or laying off workers in proportion
to changes in demand.
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’.
Vary inventory levels: Demand fluctuations can be met by large amount of inventory.
Subcontract: Upward shift in demand from low level. Constant production rates can be met by
using

38 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Aggregate planning guidelines:
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 basis.

Operations Planning
34 operations management & strategic management

Illustration
ABC. Co. has developed a forecast for the group of items that has the following demand pattern

Quarter Demand Cumulative demand

1 270 270
2 220 490
3 470 960
4 670 1630
5 450 2080
6 270 2350
7 200 2550
8 370 3920

The firm estimates that it costs `150 per unit to increase production rate `200 per unit to decrease
the production rate, `50 per unit per quarter to carry the items in inventory and `100 per unit if
subcontracted. Compare the costs of the pure strategies.

Solution:
Different pure strategies are
Plan I
In this pure strategy, the actual demand is met by varying the work force size. This means that
during the period of low demand, the company must fire the workers and during the period of
high demand the company must hire workers. These two steps involve associated costs. In this
strategy, the production units will be equal to the demand and values in each period. The cost of
the plan is computed in the table below,

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 39

 Quarter Demand Cost of increasing (`) Cost of decreasing (`) Total cost of plan
Production level (`) Production level (`)
1 270 — — —
2 220 — 50 × 200 = 10,000 10,000
3 470 250 × 150 = 37,500 — 37,500
4 670 200 × 150 = 30,000 — 30,000
450 — 220 × 200 = 44,000 44,000
6 270 — 180 × 200 = 36,000 36,000
7 200 — 70 × 200 = 14,000 14,000
8 370 170 × 150 = 25,500 — 25,500
Total 1,97,000

Plan II
In this plan, the company computes the average demand and sets its production capacity to this
average demand. This results in excess of units in some periods and also shortage of units during
some other periods. The excess units will be carried as inventory for future use and shortage of
units can be fulfilled using future inventory.
The cost of the plan II is computer in the table. The plan incurs a maximum shortage of 255 units
during 5 periods. The firm might decide to carry 255 units from the beginning of period 1 to avoid
shortage. The total cost of the plan is ` 96,000.

Quarter Demand Cum Prod. Cum. prod Inventory adjusted Cost of

demand inventory Holding
255 at beg. of inventory (`)
period 1
1 270 270 365 365 95 350 17,500
2 220 490 365 730 240 495 24,750
3 470 960 365 1095 135 390 19,500
4 670 1630 365 1460 –170 85 4,250
5 450 2080 365 1825 –255 0 0
6 270 2350 365 2190 –160 95 4,750
7 200 2550 365 2555 5 260 13,000
8 370 2920 365 2920 0 255 12,750
Total  96,500

40 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Plan III
The additional demand other than the normal capacity is met by subcontracting. The cost of the
plan III amounts

Quarter Demand Production Subcontract Incremental cost

units @ ` 100/units
1 270 200 70 70 × 100 = 7,000
2 220 200 20 20 × 100 = 2,000
3 470 200 270 270 × 100 = 27,000
4 670 200 470 470 × 100 = 47,000
5 450 200 250 250 × 100 = 25,000
6 270 200 70 70 × 100 = 7,000
7 200 200 0 0
8 370 200 170 170 × 100 = 17,000
Total = 1,32,000

The total cost of pure strategies is given below. On observation Plan II (Changing inventory levels)
has the Cost.
Plan Total cost (`)
Plan I 1,97,000
Plan II 96,500
Plan III 1,32,000

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 41

 MATERIAL REQUIREMENT
PLANNING

Material requirement planning (MRP) refers to the basic calculations used to determine
component requirements from end item requirements. It also refers to a broader information
system that uses the dependence relationship to plan and control manufacturing operations.
MRP is a technique of working backward from the scheduled quantities and needs dates
for end items specified in a master production schedule to determine the requirements for
components needed to meet the master production schedule.
“Materials Requirement Planning (MRP) is a technique for determining the quantity and
timing for the acquisition of dependent demand items needed to satisfy master production
schedule requirements.”
MRP is one of the powerful tools that, when applied properly, helps the managers in achieving
effective manufacturing control.

MRP Objectives
1. Inventory reduction: MRP determines how many components are required, when they
are required in order to meet the master schedule. It helps to procure the materials/
components as and when needed and thus avoid excessive build up of inventory.
2. Reduction in the manufacturing and delivery lead times: MRP identifies materials and
component quantities,timings when they are needed, availabilities and procurements
and actions required to meet delivery deadlines. MRP helps to avoid delays in production
and priorities production activities by putting due dates on customer job orders.
3. Realistic delivery commitments: By using MRP, production can give marketing timely
information about likely delivery times to prospective customers.
4. Increased efficiency: MRP provides a close coordination among various work centres
and hence helps to achieve uninterrupted flow of materials through the production line.
This increases the efficiency of production system.

Functions served by MRP

1. Order planning and control: When to release orders and for what quantities of materials.
2. Priority planning and control: How the expected date of availability is compared to the
need date for each component.
3. Provision of a basis for planning capacity requirements and developing a broad business
plans.

42 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Advantages and Disadvantages of MRP
Advantages:
(i) Reduced inventory,
(ii) Reduced idle time,
(iii) Reduced set up time,
(iv) Ability to change the master production schedule,
(v) Ability to price more competitively,
(vi) Better customer service,
(vii) Better response to market demands,
(viii) Reduced sales price.
(v) Changes order quantities,
(vi) Advances or delays order due dates.

Disadvantages:
Even though MRP system has many advantages, there are some problems with MRP systems
which make them fail in many firms. Three major causes for failures of an MRP system are:
(i) Lack of top management commitment. MRP must be accepted by top management as a
planning tool with specific reference to profit results. All executives concerned with the
implementation of the MRP system must be educated emphasizing the importance of
MRP as a closed-loop, integrated strategic planning tool.
(ii) MRP was presented and perceived as a complete and stand-alone system to run a firm,
rather than as part of the total system.
(iii) The issue of how MRP can be made to function with just-in-time production system.

Manufacturing Resource Planning (MRP II)

MRP II is a management process for taking the business plan and breaking it down into specific,
detailed tasks that people evaluate, agree upon and are held accountable for.
It involves all departments viz., materials department, engineering department that must
maintain bill of materials, sales/marketing department that must keep sales plan upto date,
purchasing and manufacturing departments that must meet due dates for bought out items and
in-house manufactured items respectively.

What is ERP?
ERP is a software package developed for optimum use of resources of an enterprise in a planned
manner. ERP integrates the entire enterprise starting from the supplier to the customer, covering
logistics, financial and human resources. This will enable the enterprise to increase productivity
by reducing costs. ERP is a package for cost saving.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 43

 UNIT 3

DESIGN OF OPERATION
SYSTEM AND CONTROL

Product Design, Process Design and Production Design

Product Design is concerned with the form and function of a product. Form design involves the
determination of what a product would look like, i.e., the shape and appearance of the product,
what it will be made of (product structure) and how it will be made (process design). Functional
design deals with what function the product will perform and how it performs.
Functional Design is concerned with the first and foremost requirement of a good product i.e.,
the product should effectively perform the function for which it is developed.
Form Design is concerned with the appearance, and aesthetic considerations and also the
size, volume and weight of the product which are secondary to the performance of the product.
Process Design Process design is concerned with the overall sequences of operations required
to achieve the design specifications of the product. It specifies the type of work stations that are
to be used, the machines and equipments necessary to carry out the processes to produce the
product. The choice of process technology (i.e., manual, mechanised or automated technology)
and the process design is related to product design because the manufacturing processes must
be capable of achieving the product quality (accuracy, tolerances etc.) specified in the product
design and also the product must be designed for producibility.
Production Design The design of products and services is partially dependent on the
production system design and vice versa. A product or service designed in one way may be costly
to produce, but it may be somewhat less costly when designed another way. The concept of
designing products from the point of view of producibility is known as production design.

Importance of Product Design

Production or operations strategy is directly influenced by product design for the following
reasons:
(i) As products are designed, all the detailed characteristics of each product are established.
(ii) Each product characteristic directly affects how the product can be made or produced
(i.e., process technology and process design) and
(iii) How the product is made determines the design of the production system (production
design) which is the heart of production and operations strategy.
Further, product design directly affects product quality, production costs and customer
satisfaction. Hence, the design of product is crucial to success in today’s global competition.
A good product design can improve the marketability of a product by making it easier to
operate or use, upgrading its quality, improving its appearance, and/or reducing manufacturing
costs.
 An excellent design provides competitive advantage to the manufacturer, by ensuring
appropriate quality, reasonable cost and the expected product features. Firms of tomorrow will
definitely compete not on price and quality, but on product design.

Objectives of Product Design

(i) The overall objective is profit generation in the long run.
(ii) To achieve the desired product quality.
(iii) To reduce the development time and cost to the minimum.
(iv) To reduce the cost of the product.
(v) T o ensure producibility or manufacturability (design for manufacturing and assembly).

Factors affecting Product Design

(i) Customer requirements: The designers must find out the exact requirements of the
customers to ensure that the products suit the convenience of customers for use.
(ii) Convenience of the operator or user: The industrial products such as machines and
tools should be so designed that they are convenient and comfortable to operate or use.
(iii) Trade off between function and form: The design should combine both performance
and aesthetics or appearance with a proper balance between the two.
(iv) Types of materials used: Discovery of new and better materials can improve the product
design.
(v) Work methods and equipments: Designers must keep abreast of improvements in work
methods, processes and equipments and design the products to make use of the latest
technology and manufacturing processes to achieve reduction in costs.
(vi) Cost/Price ratio: In a competitive market, there is lot of pressure on designers to design
products which are cost effective because cost and quality are inbuilt in the design.
(vii) Product quality: The product quality partly depends on quality of design and partly on
quality of conformance. The quality policy of the firm provides the necessary guidelines
for the designers regarding the extent to which quality should be built in the design
stage itself by deciding the appropriate design specifications and tolerances.
(viii) Process capability: The product design should take into consideration the quality of
conformance,i.e., the degree to which quality of design is achieved in manufacturing.
This depends on the process capability of the machines and equipments.
(ix) Effect on existing products: New product designs while replacing existing product
designs, must take into consideration the use of standard parts and components,
existing manufacturing and distribution strategies and blending of new manufacturing
technology with the existing one so that the costs of implementing the changes are kept
to, the minimum.
(x) Packaging: Packaging is an essential part of a product and packaging design and product
design go hand in hand with equal importance. Packaging design must take into account
the objectives of packaging such as protection and promotion of the product. Attractive
packaging enhances the sales appeal of products in case of consumer products.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 45

Characteristics of Good Product Design
A good product design must ensure the following:
(i) Function or performance: The function or performance is what the customer expects the
product to do to solve his/her problem or offer certain benefits leading to satisfaction.
For example, a customer for a motor bike expects the bike to start with a few kicks on the
kick peddle and also expects some other functional aspects such as pick-up, maximum
speed, engine power and fuel consumption etc.
(ii) Appearance or aesthetics: This includes the style, colour, look, feel, etc. which appeals
to the human sense and adds value to the product.
(iii) Reliability: This refers to the length of time a product can be used before it fails. In other
words, reliability is the probability that a product will function for a specific time period
without failure.
(iv) Maintainability: Refers to the restoration of a product once it has failed. High degree
of maintainability is desired so that the product can be restored (repaired) to be used
within a short time after it breaks down. This is also known as serviceability.
(v) Availability: This refers to the continuity of service to the customer. A product is available
for use when it is in an operational state. Availability is a combination of reliability and
maintainability. High reliability and maintainability ensures high availability.
(vi) Productibility: This refers to the ease of manufacture with minimum cost (economic
production).
(vii) Simplification: This refers to the elimination of the complex features so that the intended
function is performed with reduced costs, higher quality or more customer satisfaction.
(viii) Standardisation: Refers to the design activity that reduces variety among a group of
products or parts. Standard designs lead to variety reduction and results in economies
of scale due to high volume of production of standard products. However, standardised
designs may lead to reduced choices for customers.
(ix) Specification: A specification is a detailed description of a material, part or product,
including physical measures such as dimensions, volume, weight, surface finish etc.
(x) Safety: The product must be safe to the user and should not cause any accident while
using or should not cause any health hazard to the user.

New Product Design (Product Development)

(A) The Origin of New Products:
Entrepreneurs frequently form new businesses on the basis of a unique product idea or needed
service. These new product and service ideas come from various sources, including customers, top
management, and staff from marketing, research and development, production, and engineering.

Approaches To Product Design

(i) Designing for the Customer
Designing for aesthetics and for the user is generally termed industrial design which
is probably the most neglected area by manufacturers. Many products have too many
features far more than necessary and for instance many electronic products have too
many features which the customers cannot fully make use of (operate). One approach
to getting the voice of the customer into the design specification of a product is quality

46 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 function deployment (QFD). This approach uses inter-functional teams from marketing,
design engineering and manufacturing to incorporate the features sought by the
customers in the product at the stage of product design. The customer’s requirements
(with its importance weightage) and the technical characteristics of the product are
related to each other in a matrix called house of quality.

(ii) Designing for Manufacture and Assembly (DFMA)

Traditionally the attitude of designers has been “we design it, you build it” which is
termed as “over-the-wall approach”, where the designer is sitting on one side of
the wall and throwing the design over the wall to the manufacturing engineers. The
manufacturing engineers have to deal with the problems that arise because they were
not involved in the design effort. This problem can be overcome by an approach known
as concurrent engineering (or simultaneous engineering). Concurrent engineering
means bringing design and manufacturing people together early in the design phase
to simultaneously develop the product and processes for manufacturing the product.
Recently this concept has been enlarged to include manufacturing personnel, design
personnel, marketing and purchasing personnel in loosely integrated cross-functional
teams itself. Design for Manufacturing (DFM) and Design for Assembly (DFA) are related
concepts in manufacturing. The term design for manufacturing is used to indicate the
designing of products that are compatible with an organization’s capability. Design for
assembly focuses on reducing the number of parts in a product or on assembly methods
and sequence that will be employed. Designing for manufacture includes the following
guidelines:
(a) Designing for minimum number of parts.
(b) Developing modular design.
(c) Designing for minimum part variations (i.e., communization or using standardized
parts) and
(d) Designing parts for ease of fabrication.

(iii) Designing for Ease of Production (or for Producibility or Manufacturability)

Manufacturability or Producibility is a key concern for manufacturing products. Ease of
fabrication and/or assembly is important for cost, productivity and quality.
Three concepts which are closely associated to designing for ease of production are:
(a) specifications, (b) standardization and (c) simplification.
A Specification is a detailed description of a material, part or product, including physical
measures such as dimensions, volume, weight etc. These physical measure are given
tolerances (acceptable variations).
Standardization refers to design activity that reduces variety among a group of products
or parts. This will result in higher volume for each product or part model which can lead
to lower production costs, higher product quality and lower inventory and higher ease
of automation.
Simplification of product design is the elimination of complex features so that the
intended function is performed with reduced costs, higher quality and better customer
satisfaction. Simplified design provides products to customers which can be easily
installed, maintained and used by them.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 47

 (iv) Designing for Quality
Building product quality into the product design is the first step in producing products
of superior quality. This is known as “quality of design” which is followed by “quality of
conformance.”
Quality of design refers to the quality specifications incorporated in the design. It
consists of quality characteristics such as appearance, life, safety, maintenance and
other features of the product. Quality of conformance is the degree to which the product
actually conforms to the design specification. Designing products for quality consists of
three aspects of design— (a) robust design, (b) design for production and (c) design for
reliability which are discussed in the following paragraphs:
(a) Designing for Robustness (or robust design): Customers expect products to perform
satisfactorily when used in all kinds of field conditions. A robust design is one that
will perform as intended even if undesirable conditions occur either in production
or in the field. Robustness can be designed into products by assuming less than
desirable field conditions in terms of heat, cold, humidity, nature of use, vibration
and other conditions.
(b) Designing for Production (i.e., for ease of manufacturer and assembly) was
discussed in the previous section. This can reduce the sources of error and improve
overall product quality. Modular design and designing for automation are two
aspects of designing for ease of production.
(i) Modular Design is the creation of products from some combination of basic,
preexisting Sub-systems known as modules. In this approach, products are
designed in easily segmented Components or modules. This design offers
flexibility to both production (manufacture And assembly) and marketing. The
modular design concept gives consumers a range of product options and offers
considerable advantages in manufacturing and product design. Stabilizing the
designs of the modules makes them easier to build. Even the maintenance or
repair of products in case of break down becomes easier because the faulty
module can be easily removed and replaced by a spare module,
(ii) Designing for Automation: In designing for automation, three broad issues
affecting product design efforts come into play. They are:
(i) wasteful or unnecessary processes should not be automated,
(ii) simplify the design before automation,
(iii) the process may be simplified to such an extent that automation may not
beneeded.
(c) Designing for Reliability: Reliability is a measure of the ability of a product, part
or system to perform its intended function under a prescribed set of conditions.
It is the probability that an item will function as planned over a given time period.
Reliability is always specified with respect to normal operating conditions which
are taken into consideration while designing the product for reliability. Reliability
of a product can be improved by improving the reliability of the components used
in the product, by reducing the number of components used and using backups
in case certain components fail in operation. These steps will improve the product
design (or system design) and improve the product or system reliability. Other
methods of improving reliability are improving production, and/or assembly
techniques, improving testing methods, improving preventive maintenance
procedures, improving user education etc.
48 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
 (v) Designing for Ergonomics
Poorly designed products may cause work-related accidents resulting in injuries to users.
Hence, comfort, safety and ease of use for the users are becoming more important quality
dimensions that have to be considered in product design. Human Factor Engineering or
Ergonomics applies knowledge of human capabilities and limitations to the design of
products and processes.
(vi) Designing for Environmental Protection
This includes designing products which are environmental friendly (e.g., Euro II
automobile) known as green designs. Sometimes reaction to a social or environmental
concern opens up a set of promising new design options.
A new approach called “universal design” is an example of product design in which an
attempt is made to design products that are easily operable by disabled persons.
(vii) Designing for Recycling
This approach to product design focuses on designing products so that raw materials such
as plastics can be retrieved once the product has finished its useful life and scrapped.
Recycling means recovering materials for further use. Recycling is done to achieve
cost savings, and also to meet environmental concerns and regulations. Designing for
recycling facilitates the recovery of materials and components in used products for
reuse.
(viii) Designing of Disassembly (DFD)
This involves designing products which can be more easily taken apart or disassembled.
It includes fewer parts and less material and using snap-fits where possible instead of
screws, bolts and nuts.
(ix) Designing for Mass Customization
It is a strategy of designing standardised products but incorporating some degree of
customization in the final product. Delayed differentiation and modular designs are two
tactics used to make mass customization possible.
Delayed Differentiation is the process of producing but not quite completing, a product,
postponing completion until customer preferences or specifications are known.
Modular design is a form of standardization in which component parts are grouped into
modules that are easily replaced or interchanged to produce varieties of the same basic
product. One example is a computer system in which a customer can choose a particular
configuration depending on the computing, capability desired by the customer. Modular
design help mass customisation.
(x) Other issues in product design are (a) Computer Aided Design (CAD), (b) Value
Engineering or Value Analysis which are discussed below:
(a) Computer Aided Design:
Computers are increasingly used for product design. CAD uses computer graphics
for product design. The designers can modify an existing design or create a new
design on a computer monitor screen by means of a keyboard or a joy stick.
The design can be manoeuvred on the screen, it can be rotated to provide the
designer different views of the product, it can be split apart to have a view of the
inside and a position of the product can be enlarged for closer view. The printed
version of the completed design can be taken and also the design can be stored
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 49
 electronically. A number of products such as printed circuit boards, transformers,
automobile parts, aircraft parts etc. can be designed using CAD. CAD increases the
productivity of designers from 3 to 10 times and preparing mechanical drawings
of product or parts and modifying them frequently becomes easier. Also a data
base can be created for manufacturing which can supply required information on
product geometry and dimensions, tolerances, material specifications etc. Also,
some CAD systems facilitate engineering and cost analyses on proposed designs,
for example, calculation of volume and weight and also stress analysis can be done
using CAD systems. It is possible to generate a number of alternative designs using
computer aided design systems and identify the best alternative which meets the
designer’s criteria.
(b) Value Engineering/Value Analysis in Product Design:
Value engineering or value analysis is concerned with the improvement of design
and specifications at various stages such as research, development, design and
product development. Benefits of value engineering are:
(i) Cost reduction.
(ii) Less complex products.
(iii) Use of standard parts/components.
(iv) Improvement in functions of the product.
(v) Better job design and job safety.
(vi) Better maintainability and serviceability.
(vii) Robust design.
Value engineering aims at cost reduction at equivalent performance. It can reduce
costs to the extent of 15% to 70% without reducing quality. While value engineering
focuses on preproduction design improvement, value analysis, a related technique
seeks improvements during the production process.
Once launched, even good products have limited lives and, to remain viable, the
organization seeks a flow of new product possibilities. Let’s examine the product’s
birth-to-mortality pattern.

(B) Product Life Cycle

Products, like men, are mortal. They flourish for a time, then decline and die. The life cycle of a
product has many points of similarity with the human life cycle. A product is born, grows lustily,
attains a dynamic maturity, then enters its declining years. Like a human being a product that
has not built up its potential during its formative years is likely to be relatively unsuccessful on
its maturity. But, there are critical differences between the product and the human life cycle. For
instance, every person has an average life expectancy. But the life expected of a product varies
widely. The concept of product failure is applicable both to new products and the existing ones.
There may, however, be varying periods of life spans for each product: some failing immediately,
other living for a longer period. The product, thus, has “life cycles” just as human beings have. From
its birth, a product passes through various stages, until it is finally abandoned, i. e.. discontinued
from the market.
These stages taken together are referred, to as “the product life cycle”. This life cycle of the
product comprises four stages: Introduction, Growth, Maturity and Decline.

50 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 This may graphically be represented

The introduction stage is preceded by ‘production planning and development’. This

period requires greater investment. This investment should be gradually recouped as the sales
pick up.
After testing, a product enters the introduction stage and the product will then become
available. The concept of life in the national market. Sales would begin gradually as potential
buyers learn of the product through advertising and other seIIing techniques. But the profits will
be low as part of the investment is to be recouped besides heavy expenditure on selling.
In the growth stage, both sales and profits will begin to increase. It is here that similar
other new products begin to appear in the market as substitutes and offer competition. The
management, therefore, should try to change its approach by changing its strategy from “buy my
product” to “try my product”. At the end of this stage, the distribution arrangement is likely to get
completed and the prices, if necessary, are reduced a little.
The third stage is the maturity stage. During this stage the manufacturers introduce new
models or adopt methods such as trading-in, etc., to promote the sale of their brands with a view
to retaining their position in the market. The number of buyers will continue to grow, but more
slowly.
At the final stage of decline, profit margins touch a low level, competition becomes severe
and customers start using newer and better products. It is here that the story of a product ends-a
natural but hard end.

PHASING MULTIPLE PRODUCT

A general strategy of phasing new products in and phasing old products out sustains existing
processing technology: As existing products are demanded less during the later stages of their
life cycles, new products are developed so that output capacity can remain stable. Of course,
transitions are not always smooth: rarely does capacity constant. The technologies needed to
produce different products are not identical, and changes are almost necessary. Organizations do
not always have a new product waiting for introduction at the precise moment that an existing
product begins to decline.

Process Planning and Process Design

At the time designing and developing a product, due consideration is given for the manufacturability
or production using the current process technology and the capability of the firm to manufacture
the product.

What is a process?
A process is a sequence of activities that is intended to achieve some result, typically to create
added value for the customers.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 51

 A process converts inputs outputs in a production system. It involves the use of organisation’s
resources to provide something of value. No product can be made no service can be provided
without a process and no process can exist without a product or service.

Types of Process: basically process can be categorised as:

1. Conversion processes, i.e., converting the raw materials into furnished product (for
example, converting iron ore into iron and then to steel). The conversion process could
be metallurgical or chemical or manufacturing or construction process.
2. Manufacturing processes can be categorised into (a) Forming process, (b) machine
process and (c) assembly process.
3. Testing processes which involve inspection and testing of products (sometimes
considered as part of the manufacturing process).
Forming processes include foundry process (to produce casting) and other process such as
forging, stamping, embossing and spinning. These processes change the shape of the raw material
(a metal) into the shape of the workplace without removing or adding material.
Machine processes comprise metal removal operations such as turning, milling, drilling,
grinding, shaping, planning, boring etc.
Assembly processes comprise involve joining of parts or components to produce assemblies
having specific functions. Examples of assembly processes are welding, brazing, soldering,
riveting, fastening with bolts and nuts joining using adhesives.

Process planning
What is process planning? Process planning is concerned with planning the conversion process
needed to convert the raw material into furnished product. It consists of two parts:
(i) Process Design is concerned with the overall sequences of operations required to achieve
the product specification. It specifies the type of work stations to be used, the machines
and equipments necessary to carry out the operations. The sequences of operations are
determined by (a) the nature of the product, (b) the material used, (c) the quantities to
be produced and (d) the existing physical layout of the plant.
(ii) Operations Design is concerned with design of the individual manufacturing operation.
It examines the man-machine relationship in the manufacturing process. Operation
design must specify how much labour and machine time is required to produce each
unit of the product.

Process selection
Process selection refers to the way production of goods or services is organised. It is the basis for
decisions regarding capacity planning, facilities (or plant) layout, equipment and design of work
systems. Process selection is necessary when a firm takes up production or services to be offered
to the customers,
Three primary questions to be addressed before deciding on process selection are:
1. How much variety to be addressed before deciding on process selection are:
2. What degree of equipment flexibility will be needed?
3. What is the expected volume of output?

52 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Process Strategy
A process strategy is an organisation’s approach to process selection for the purpose of transforming
resource inputs into goods and services (outputs). The objective of a process strategy is to find a
way to produce goods and services that meet customers requirement and product specification
(i.e., design specifications) within the constraints of cost and other managerial limitations.
Key aspects in process strategy include
(i) Make or buy decisions
(ii) Capital intensity and
(iii) Process flexibility

Three process strategy: virtually every good or service is made by using some variation of one of
the process strategy. They are:
(i) Process Focus: mainly (about 75 percent) of global production is devoted to low volume.
High variety products in manufacturing facilities called job shops. Such facilities are
organised around performing processes. For example, the process might be welding,
grinding or painting carried out in departments devoted to these processes.
(ii) Repetitive Focus: A repetitive process oriented production process that uses modules.
It fails between product focus and process focus. It uses modules which are parts or
components prepared often in a continuous or mass production process
(iii) Product Focus: it is a facility organised around products, a product oriented, high-volume
low-variety process. It is also referred to as continuous process because it has very long
continuous production run. Examples of product are steel, glass, paper, electric bulbs,
chemical and pharmaceutical products etc.

Process Management
Process management is concerned with the selection of inputs, operations, work flows and
methods that transform inputs into outputs. The starting point of input selection is the make-or-
buy decision (i.e., deciding which parts and components are to be produced in-house and which
are to be purchased from outside suppliers)

Process Decisions
It must be made when:
1. A new or modified product or service is being offered
2. Quality must be improved
3. Competitive priorities have changed
4. Demand for a product or service is changed
5. Cost or a availability of material has changed
6. Competitors are doing better by using a new technology or a new process.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 53

Major Process decisions
Five common process decisions considered by production/operations managers are:
1. Process Choice determines whether resources are organised around products or
processes in order to implement the flow strategy. it depends on the volumes and
degree of customisation to be provided
2. Vertical Integration is the degree to which a firm’s own production system handles
the entire supply chain starting from procurement of raw materials to distribution of
finished goods.
3. Resources flexibility is the ease with which equipments and workers can handle a wide
variety of products, levels of output, duties and functions.
4. Customers Involvement refers to the ways in which customers become part of the
production process and the extent of their participation.
5. Capital intensity is the mix of equipment and human skills in a production process.
Capital intensity will be high if the relative cost of equipment is high when compared to
the cost of human labour.

These major process decisions are discussed in detail in the following paragraphs:
1. Process choice: The production manager has to choose from basic process types-
(a) Job shop process: It is used in job shops when a low volume of high-variety goods
are needed. Processing is intermittent, each job requires somewhat different
processing requirements. A job shop is characterised by high customisation (made
to order), high flexibility of equipment and skilled labour and how volume.
(b) Batch process: Batch processing is used when a moderate volume of goods or
service is required and also a moderate variety in product or services. A batch
process differs from the job process with respect with respect to volume and
variety. In batch processing volumes are higher because in batches include paint,
ice cream, soft drinks, books and magazines.
(c) Repetitive process: this is used when higher volumes of more standardised goods
or services are needed. This type of process is characterised by slight flexibility
of equipment (as products are standardised) and generanally low labours skills.
Products produced include automobiles , home appliances toys etc. Repetitive
process is also referred to as line process as it include production lines and
assembly lines in mass production.
(d) Continuous process: this is used when a very high standardised product is desired
in high volumes. These systems have almost no variety in output and hence there
is no need for equipment flexibility. A continuous process is the extreme end high
volume, standardised production with rigid line flows.
(e) Project process: it is characterised by high degree of job customisation the large
scope for each project and need for substantial resources to complete the project.
Examples of projects are building a shopping centre, a dam, a bridge, construction
of factory, hospital, developing a new product, publishing a new book etc.

2. Vertical Integration: vertical integration is the amount of the production and distribution
chain from suppliers of components to the delivery or products/services to customers,

54 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 which is brought under the ownership of a firm. The management decides the level or
degree of integration by considering all the activities performed from the acquisition of
raw materials to the delivery of finished products to customers. The degree to which
a firm decides to be vertically integrated determines how many production processes
need to be planned and designed to be carried out in-house and how many production
outsourcing. when managers decide to have more vertical integration there is less
outsourcing. The vertical integration is based on ‘make-or-buy’ decisions, with make
decisions meaning more integration and a buy decisions meaning less integration and
more outsourcing. Two directions of vertical integration are (a) Backward Integration
which represents moving upstream toward the sources of raw materials and parts , for
example a steel mill going for backward integration by owing iron ore and coal mines
and a large fleet of transport vehicles to move these raw materials to the steel plant,
(b) Forward Integration in which the firm acquires the channel of distribution (such as
having own warehouses, and retail outlets).

Advantages of vertical integration are:

(i) Can sometimes increase market share and show the firm enter foreign markets more
easily.
(ii) Can achieve more timely delivery.
(iii) Can achieve savings in production cost produce higher quality goods
(iv) Better utilisation of all types of resources.

Disadvantages of vertical integration are:

1. Not attractive for low volumes.
2. High capital investment and operating costs.
3. Less ability to react more quickly to changes in customer demands, competitive actions
and new techniques

Resources Flexibility : The choices that management makes concerning competitive priorities
determine the degree of flexibility required of a firm’s resources - its employees, facilities and
equipment. Production managers must decide whether to have flexible workforce which with
provide reliable customer service and avoid capacity bottlenecks.
Customer-involvement is the extent to which customers interact with the process. A firm which
completes on customisation allows customers to come up with their own product specification
or even become involved in the designing process for the product (quality function deployment
approach to design for incorporating the voice of the customer).
Capital intensity means the predominant resources used in manufacturing, i.e., capital
equipments and machines rather than labour. Design regarding the amount of capital investment
needed for equipments and machines is important for the design of a new process or the redesign
of an existing one.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 55

 UNIT 4

TIME STUDY, MOTION STUDY

AND WORK STUDY

Time, Motion and Work study

Time Study:-
It is a Scientific method for analysis of methods and Equipment used or planned in doing a piece
of work.
It help in development in practical material of the best manner of doing it.
It also determines the time required to complete the job.
In time study setting of production standards, standard for cost purpose and wages incentives
are emphasized.

Motion Study:-
In motion study work in divided into fundamental motion. In this study best way of doing work is
determined by motion analysis and operators are trained to follows the method. It removes the
useless motion and improves the sequence of motion.

Work Study:-
Work study aims at finding best and most efficient way for using the available 4 ‘M’ resources,
Men, Materials, Money and Machinery.

Method Study:-
It is a systematic method for investigation of the method by which jobs completed. It helps to
develop and install an easy rapid efficient effective and less fatiguing procedure for doing the job
at minimum cost.
It can be made by the help of motion study and time study.

Features of Method study programme.

(a) Uniform application
(b) Established standard practice
(c) Continuous review.
(d) Credit distribution.

Job Evaluation:-
It is a ranking grading and weighing essential work characteristics.

Steps for Job Evaluation

(i) Preparation of preliminary Description of each existing job

56 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 (ii) Analysis of job to arrive at final job description and specification
(iii) Analysis of job according to approved description.
(iv) Determination of worth of value.
Job Description  Means Job Content.
Job Specification  Derived from Job Description

Fundamental Criteria for job evaluation

(a) Qualification of workers.
(b) Job difficulties.
(c) Job responsibilities
(d) Working conditions.

System of Job Evaluation

Grading / Ranking Method Factor Comparison Method Point Ranking Method

(i) Jobs are ranked by (i) It ranks each job with There are three methods
Judges respect to each factor (i) Straight point method
(ii) Hrly rate of wages are that characterize the job (ii) Weighted point method
suggestion by the (ii) All jobs are compared (iii) Direct to money method
Judges according to and ranked according to
their rank mental, skill, then physical
required.

Formula:-
Total normaltime
• Standard time of Job =
(1 − Allowance rate)
• Normal time = Average time × Percentage rate the observed worker. Performance
rating.
Durationof Study
• Over all time per unit (To) = .
No. of Jobs produced during the study

Pr oductive observation
• Effective time per piece (Te) = Over alltime ×
Total observations
• Machine control time per piece (Tm) = Effective time per piece × Ratio of Machine
element.
• Normal time per piece = Tm + (TH × Performance ratio)
• Standard time per piece = Normal time per piece × 1 + Personal Allowance)
2
 Z .S 
• n = 
 A.Y 
Z at 95% C.L – 1.96
S = Standard Deviation.
A = Limit within mean varies.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 57

 (∑ x)
2

S = ∑ x2 −
n
n−1
c 2 p (1 − p ) c 2 p (1 − p )
= N =
( s. p ) 2 ( E )2
Where s = relative error of true proportion
P = percentage or true proportion of activity
C =constant for confidence limit
C= 1 ,2 and 3 considered as 68.3% , 95 % and 99% respectively
E = absolute error

PRACTICAL PROBLEM
Problem: 1
Continuous stopwatch study observations for a job are given. Compute the standard time for the
job, if the total allowances are 15%.

Ele. Description Cycle time (Min) P.R. %

No. 1 2 3 4 5 6 7 8 9 10
A Loosen Voice 0.09 0.49 0.89 1.31 1.70 2.09 2.50 2.88 3.29 3.71 90
B Set bar Length 0.16 0.56 0.95 1.38 1.76 2.16 2.57 2.95 3.36 3.78 110
C Switch m/c 0.28 0.67 1.09 1.49 1.88 2.28 2.68 3.07 3.49 3.90 120
D Unlock arm 0.41 0.80 1.21 1.61 2.00 2.41 2.80 3.20 3.62 4.03 100
& set saw

Ele = Element, P.R = Performance Rating

Problem: 2
The work – study engineer carries out the work sampling study. The following observations were
made for a machine shop for work study of 120 Hrs

Total number of observations 7000

No. working activities 1200
Ratio between manual to machine elements 2:1
Average rating factor 120%
Total number of jobs produced during study 800 units
Rest and personal allowances 17%
Compute the standard time for the job.

58 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 3
The time study of a machinery operation recorded cycle times of 8.0, 7.0, 8.0 and 9.0 minutes.
The analyst rated the observed worker as 90%. The firm uses a 0.15 allowance fraction. Compute
the standard time.

Problem: 4
An analysis wants to obtain a cycle time estimate that is within ± 5% of the true value. A preliminary
run of 20 cycles took 40 minutes to complete and had a calculated standard deviation of 0.3
minutes. What is the coefficient of variation to be used for computing the sample size for the
forthcoming time study?

Problem: 5
A job has been time standard for 20 observations. The mean actual time was 5.83 minutes and
the standard deviation of the time is estimated to be 2.04 minutes. How many total observations
should be taken for 95% confidence that the mean actual; time has been determined within
10%?

Problem: 6
An analyst has observed a job long enough to become familiar with it and has divided it into five
elements. The element times for the first four cycles and a performance rating for each element
are given in the following table,

Element Cycle Cycle Cycle Cycle Performance Rating (%)

1 2 3 4
1 1.246 1.328 1.298 1.306 90
2 0.972 0.895 0.798 0.919 100
3 0.914 1.875 1.964 1.972 100
4 2.121 2.198 2.146 2.421 110
5 1.253 1.175 1.413 2.218 100

Do any of the times look like outliners, i.e. probable errors in reading or recording data that
should not be included in the analysis?
Compute an estimated normal time for the job based on the data available at this stage of the
study
On the basis of the data available, what sample size should be taken to estimate the time for
element 2 within 5% of the true mean time with 95% confidence?

Problem: 7
Stopwatch time study figure for a job which is continuous in nature are given below. Calculate the
standard time for the job assuming that the sample size is adequate, and total allowances are 15
percent.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 59

 Ele. Description Cycle time (Min) P.R.
No. Per cycle 1 2 3 4 5 6 7 8 9 10
1 A 0.10 0.50 0.90 1.32 1.71 2.10 2.51 2.89 3.30 3.72 90
2 B 0.17 0.57 0.96 1.39 1.77 2.17 2.58 2.96 3.37 3.79 110
3 C 0.29 0.68 1.08 1.50 1.89 2.29 2.69 3.08 3.41 3.91 120
4 D 0.42 0.81 1.22 1.62 2.01 2.42 2.81 3.21 3.63 4.04 100

Problem: 8
An 8 hours work measurement study in a plant reveals the following: Units produced = 320 nos.
Idle time = 15%. Performance rating = 120%. Allowances =12% of normal time. Determine the
standard time per unit produced.
Solution:
Observed time for 320 units = Working time - Idle time = 8 – 8 × 0.15
= 8 – 1.2
= 6.8 hours – 6.8 × 60
= 408 minutes.
Observed time per unit = 320/408 = 1.275 minutes
Observed time/unit × Observed rating
Normal time per unit =
Standard Rating
1.275 × 120
Normal time per unit =
100
Standard time/unit = Normal time/unit + Allowances
= 1.53 minutes + 12% of 1.53 minutes
= (1.53 + 0.184) minutes = 1.714 minutes

Problem: 9
Calculate the standard production per shift of 8 hours duration, with the following data. Observed
time per unit = 5 minutes, Rating factor - 120%
Total allowances = 33 1/3% of normal time.
Solution:
Normal time per unit = Observed time/unit × Rating factor
= 5 × 1.2 =6
Standard time/unit = Normal time/unit + Allowances
= 6 + 2 = 8 minutes/unit
Standard production in shift of 8 hours = 8 × 60/ 8 = 60 unit

Problem: 10
A work study practitioner who conducted a work sampling study assesses the activity level of a
worker to be 70%. During the space of 8 hours working, this worker turns out 320 components. If
the company policy is to inflate the normal time arrived at by work sampling study by 20%, what
should be the allowed time per unit?
60 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
Solution:
Activity level as per work sampling study = 70%
Actual working time per shift of 8 hours = 8 ×0.70 = 5.6 hours
Normal time taken per unit = 5.6 × 60 /320 = 1.05 minutes
Allowed time = 1.05 ×1.2 = 1.26 minutes

Problem: 11
Calculate the standard time per article produced from the following data obtained by a work
sampling study.
Total no. of observations - 2500 No. of working observations - 2100
No. of units produced in 100 hours duration = 6000 numbers
Proportion of manual labour = 2/3
Proportion of machine time = 1/3
Observed rating factor = 115%
Total allowances = 12% of normal time
Solution: Actual working time in the = 100×2100 / 2,500
= 84 hours duration of 100 hours
Time taken per article = 84×60 / 6,000 = 0.84 minutes
Observed manual labour = 0.84 ×2/ 3 = 0.56minute per article
Observed machine time per article = 0.84×1/ 3 = 0.28minute
Normal labour time per unit = Observed time/unit × Rating factor
= 0.56 × 1.15 = 0.644 minute
Standard labour time per unit 0.644 +12% of 0.644 = 0.721minute
Standard time per unit of article produced = 0.721 + 0.28 =1.0 minute

Problem: 12
Compute the production cost per piece from the following data,
(i) Direct material per piece - ` 2
(ii) Wage rate `2000 per month consisting of 25 working days and 8 hours per day.
(iii) Overheads expressed as a percentage of direct labour cost - 200%.
(iv) The time for manufacture of 4 pieces of the item was observed during time study. The
manufacture of the item consists of 4 elements a, b, c and d. The data collected during
the time study are as under. Time observed (in minutes) during the various cycles are as
below:

Element Cycle 1 Cycle 2 Cycle 3 Cycle 4 Rating

(0-1 00)
A 1.2 1.3 1.3 1.4 85
B 0.7 0.6 0.65 0.75 120
C 1.4 1.3 1.3 1.2 90
D 0.5 0.5 0.6 0.4 70

The personal, fatigue and delay allowance may be taken as 25% on normal time

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 61

HINT
Standard time = 3.435 + 0.858 = 4.29 ≈ 4.3 minutes
As this time is the time taken for producing 4 pieces.
Standard time per piece = 4.3/ 4 =1.075 minutes

Calculation of costs
Direct labour cost of the job = Standard time/job in hour × Labour rate/hour
Labour rate per hour = 2,000/ 25 × 8 = ` 10
Direct labour cost for the job = 1.075 × 10/ 60 = ` 0.18
Direct material cost per piece = ` 2
Overhead cost @200% of labour cost= 2 × 0.18 = ` 0.36
Total production cost per piece =0.18 + 2.0 + 0.36 = ` 2.54 Q

Problem: 13
Pilot study showed percentage of occurrence of an activity as 50%. Determine the no of observation
required for a work sampling study for 95% confidence level and a relative error of ± 2%
Ans: 10000

Problem: 14
In a work sampling study, a mechanic was found to idle for 20% of the time. Find out the number
of observation needed to conform to the above figures with a confidence level of 95% and a
relative error level by ± 5%.
Ans: 6400

Problem: 15
A work sampling study is to be made of a typist pool. It is felt that typists are idle 30 percent of the
item. How many observations should be made in order to have 95.5% confidence that accuracy
is within ±4%.
Ans: 525

Problem: 16
Chimanbhai Chitalia, the industrial engineer, did a work sampling study on a bar-cutting machine.
The details of the study are as:
Component No. of Observed Observations
1. Cutting 95
2. Getting repaired 75
3. Idle for want of work 105
4. Getting cleaned 25
Total no. of observations: 300
Chimanbhai wants the ratios to be accurat1e within ± 1 per cent at 95 per cent confidence level,
in which case
(a) Should Chimanbhai have taken more observations? Explain.
(b) What is the level of accuracy you can expect from Chimanbhai›s observations?

62 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Solution:
(a) Chimanbhai’s observations in each of the work (!) components given in terms of fractions
are:
Component Observations Fraction of the Total (p)
1. Cutting 95 95/300
2. Repair 75 75/300
3. Idle 105 105/300
4. Idle 25 25/300
Now, the minimum number of observations required for the desired level of confidence are:
n = 4p (1 – p)/E2. The n value corresponding to each of the components is
Cutting: n = 4(0.317) (1 – 0.317)/(0.01)2 = 8660 (Note: E is given as 1% i.e. 0.01)
Repair: n = 4(0.250) (1 – 0.250)/(0.01)2 = 7500
Idle: n = 4 (0.350) (1 – 0.350)7(0.01)2 = 9100
Cleaning: n = 4 (0.083) (1 – 0.083)7(0.01)2 = 3044
Since the largest number out of the above is 9100, that is the minimum number of
observations required to express the work components to the 1 per cent accuracy at a
95 per cent confidence level. Of course, Chimanbhai has had too few observations.
(b) The level of accuracy that can be expected from Chimanbhai’s (number of) observations
E= ± 2 p(1− p) / n where n = 300 and p = fraction of each component.
Thus, the level of accuracy is different for each component. Let us compute:
Cutting: E = ± 2 (0.137) (1 – 0.317) /300 = ± 0.0537 i.e. ± 5.37 per cent
Repair: E = ± 2 (0.250) (1 – 0.750) /300 = ± 0.05 i.e. ± 5.00 per cent
Idle: E = ± 2 (0.350) (1 – 0.650) /300 = ±0.0551 i.e. ± 5.51 per cent
Cleaning: E = ± 2 (0.083) (1 – 0.917) /300 = ± 0.0319 i.e. ± 3.19 per cent
Thus, Chimanbhai’s scheme is least accurate for finding the ratio of idle time to total
time. We can say the level of accuracy to be expected from Chimanbhai’s scheme is +
5.51 per cent, i.e. errors upto this magnitude can occur in estimating the ratios.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 63

 PRODUCTION PLANNING
AND CONTROL

Production planning control can be viewed as the nervous system of a production operation.
The primary concern of production planning and control is the delivery of products to customers
or to inventory stocks according to some predetermined schedule. All the activities in the
manufacturing or production cycle must be planned, coordinated, organized, and controlled to
achieve this objective. From a long-term point of view (usually from seven to ten years or more)
production planning largely deals with plant construction and location and with product-line,
design and development. Short-range planning (from several months to a year) focuses on such
areas as inventory goals and wage budgets. In plans projected over a two-to-five year period,
capital-equipment budgeting and plant capacity and layout are the major concern. Production
planning and control normally reflects the short range activities and focuses on the issues and
problems that arise in the planned utilization of the labour force, materials, and physical facilities
that are required for manufacturing the products in accordance with the primary objectives of
the firm.

Problem: 1
Machines K and L, both capable of manufacturing an industrial product, compare as follows:

Machine K Machine L
Investment Rs.60,000 Rs.1,00,000
Interest on borrowed capital 15% 15%
Operating cost( wages , power, etc.) per hour Rs. 12 Rs. 10
Production Per Hour 6 pieces 10 pieces

The factory whose overhead costs are Rs. 1,20,000 works effectively for 4,000 hours in 2 shifts
during the year.
(i) Justify with appropriate calculations which of the two machines you would choose for
regular production.
(ii) If only 4000 pieces are to be produced in a year, which machine would give the lower
cost per piece.
(iii) For how many pieces of production per year would the cost of production be same on
either machine?
Problem: 2
A department of a company has to process a large number of components/month. The process
equipment time required is 36 minutes/component, whereas the requirement of an imported
process chemical is 1.2 liters /component. The manual skilled manpower required is 12 minutes/
component for polishing and cleaning. The following additional data is available:

64 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 Particular Availability/month Efficiency of utilisation
Equipment hour 500 85%
Imported chemicals 1000 95%
Skilled manpower – hours 250 65%

(i) What is the maximum possible production under the current conditions?
(ii) If skilled manpower availability is increased by overtime by 20%, what will be the impact
on production increase? (Dec. 2011)

Problem: 3
A manufacturing enterprise has introduced a bonus system of wage payment on a slab-rate based
on cost of production towards labour and overheads.
The slab-rate being

1% - 10% saving in production cost 5% of saving

Between 11%-20% saving in production cost 15%
Between 21%-40% saving in production cost 30%
Between 41%-70% saving in production cost 40%
Above 70% saving in production cost 50%

The rate per hour for three workers A, B, C are Rs. 5, Rs. 5.50 and Rs. 5.25 respectively. The
overhead recovery rate is 500% of production wages and the material cost is Rs. 40 per unit. The
standard cost of production per unit is determined at Rs. 160 per unit.
If the time taken by A, B, C to finish 10 units is 26 hours, 30 hours and 16 hours respectively, what
is the amount of bonus earned by the individual workers and actual cost of production per unit?

Problem: 4
Calculate the break-even point for the following:
Production Manager of a unit wants to know from what quantity he can use automatic machine
against semi-automatic machine.

Data Automatic Semi-automatic

Time for the job 2 mts 5 mts
Set up time 2 hrs 1.5 hrs
Cost per hour Rs. 20 Rs. 12

Problem: 5
Two alternative set-ups, A and B are available for the manufacture of a component on a particular
machine, where the operating cost per hour is Rs. 20/-.

Set-up A Set-up B
Components/set-up 4,000 pieces 3,000 pieces
Set up cost Rs. 3,00/- Rs. 1,500/-
Production rate/hour 10 pieces 15 pieces

Which of these set-ups should be used for long range and economic production?
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 65
Problem: 6
A and M are two fierce competitors. N a leading manufacturer of mobile phones approaches
them separately to share what they can offer for outsourcing the manufacture of mobile phone
components on a standardized machine whose operating cost is Rs. 40/- per hour. N requests you
to evaluate and advice based on following offers made by A and M as to which of the should be
chosen? (Dec,2008)

Company A Company B
Mobile Components /set-up 8,000 pieces 6,000 pieces
Set up cost Rs. 600/- Rs. 3,000/-
Production rate/hour 20 pieces 30 pieces

Ans. 2.075, 1.833

Problem: 7
Two alternative set-ups, A and B are available for the manufacture of a component on a particular
machine, where the operating cost per hour is Rs. 25/-.

Set-up A Set-up B
Components/set-up 20,000 pieces 30,000 pieces
Set up cost per year Rs. 500 Rs. 600
Production rate/hour 20 pieces 40 pieces

Find out the manufacturing cost / piece under each setup. Which of these set-ups should be used
for long range and economic production, assuming 3000 hours of working in a year?
(June 2011)

Problem: 8
Empire Glass company can produce a certain insulator on any three machine which have the
following charges shown below. The firm an opportunity to accept an order for either (i) 50 units
at Rs. 20/units or (ii) 150units at Rs. 12/units.

Machine Fixed cost (Rs.) Variable cost(Rs.)

A 50 4/units
B 200 2/units
C 400 1/units

(i) Which machine should be used if 50 units order is accepted and how much profit will
result?
(ii) Which machine should be used if 150 units order is accepted and how much profit will
result?
(iii) What is the break-even volume for machine B when the price is Rs 12/unit
(iv) Suppose the fixed cost for machine A is a stepped function with Rs. 50 upto 40 units and
Rs. 100 thereafter, will the answer to (i)and(ii) above ? If so, what will be the revised
answer?
Ans. (i) Machine A Profit 750; (ii) Machine B Profit 1330; (iii) BEP 20units; (iv) Hence the answer
in this case will not vary.
66 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
Problem: 9
A manufacturing organization operate in incentive scheme on slab rate based on cost of production
as shown below:

Saving in production cost Incentive Amount

(labour+ material+overheads) (as% of saving)
1 to 10% 5%
11% to 20% 15%
21% to 40% 30%
41% to 78% 40%
Above 70% 50%

Three workers X, Y, and Z take 25 hour, 30 hour and 15 hour respectively to produce 10 unit
of the product and their respective wage rates are Rs 6.00, Rs.6.50 and rs.7.00 per hour .The
material cost is Rs. 50/- per unit and the overhead recovery rate is @500% of cost of wages. The
standard cost of production per unit is determined at RS. 175 per unit. What is the amount of
incentive earn by each of these workers and what is the actual cost production per unit in each
case. (Dec. 2010)

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 67

 SCHEDULING PROBLEMS

Scheduling:
‘Scheduling’ is the next important function of production planning and control after ‘Routing’.
It determines the starting and the completion timings for each of the operations with a view
to engage every machine and operator of the system for the maximum possible time and; without
imposing unnecessary burden over them. Scheduling is the determination of the time that should
be inquired to perform each operation and also the time that should be required to perform the
entire series as routed.
Scheduling involves establishing the amount of work to be done and the time when each
element of the work will start or the order of the work.
Scheduling technique is an important technique of determining the starting and the
completion timings of each operation and that of the total manufacturing process so that the
man and machines can be utilized to the maximum.
Scheduling depends upon a number of factors, e.g., routing, the method of production,
quantity of production, transportation of raw materials, production capacity, the probable data
of delivery specified by customers in their orders and the past records.
Relationship between ‘Routing’ and ‘Scheduling’. ‘Routing’ and ‘Scheduling’ are independent
and either of these activities cannot be undertaken independently. It is very difficult to prepare
schedules without determining the routing of sequence of operations. Routing is the prerequisite
of scheduling. Unless route or sequence of operations, tools, equipment and plants and the persons
by when operations are to be performed, are established, the time taken by each operation, the
idle time of men and machine and total time for the whole process cannot be ascertained in a
convincing manner.
Conversely, scheduling is equally important for routing. It is quite difficult to route an item
efficiently through a plant without consulting previously-designed schedules.
The main aim of routing is to pass the item through the process of manufacture by a route which
is the best and the most economical .And a route or sequence of operations may be considered
best which utilizes the men, materials and machines to the maximum and which consumes the
shortest time during the process of production. This information (time schedule of each operation)
can be obtained from schedules. So, scheduling is necessary for effective routing.
Thus, we can conclude that routing and scheduling are inter-related, inter-connected and
inter-dependent activities of production planning and control.
Relationship between Routing and Scheduling: Both are interconnected as scheduling
is difficult without routing and routing is also not effective without scheduling. Routing is a
prerequisite for scheduling while time to be taken ‘may form the basis of routing and that is fixed
by scheduling.

68 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Principles of Scheduling:
The principles of scheduling are:
(a) The principle of optimum task size: Scheduling tends to achieve its maximum efficiency
when the task sizes are small and all tasks are of the same order of magnitude.
(b) The principle of the optimum Production plan: Scheduling tends to achieve its maximum
efficiency when the work is planned, so that it imposes an equal/even load on all the
plant.
(c) The principle of the optimum operation sequence: Scheduling tends to achieve its
maximum efficiency when the work is planned so that the work centers are normally
used in the same sequence.

Scheduling Systems:
Scheduling Systems may be classified into four groups as shown below:
(i) Unit scheduling system: This is used for scheduling when jobs are produced one by and
are of different type that is for job production.
(ii) Batch scheduling system: When jobs are produced to order, in batches, this is used.
(iii) Mass scheduling system: When large number of items of similar type are produced that
is in mass production, this is used.

Sequencing rules for single facility:

When we have a single facility, and the orders are in queue, then they are processed depending
on the rules mentioned below:
(a) First in first served or first in first out (FIFS/FIFO): Here the jobs are processed as they
come in. This is commonly observed queue discipline.
(b) Shortest processing time (SPT): The jobs having shortest processing time are processed
first. This is just to avoid formation of queue. For example, when you go for Xeroxing a
document, and other person comes for Xeroxing a book, then document is Xeroxed and
then the book is taken for Xeroxing.
(c) Minimum due date (MDD): Here jobs are processed in ascending order of their available
time before delivery date. By doing so, we can keep up the delivery promises. To meet
the delivery promises, if necessary, overtime, sub contracting etc., may be used.
(d) Last come first served or last in first out (LCFS/LIFO): This generally happens in case
of inventory stocking and using. When material piles up, the material at the top i.e.,
material last arrived is used first.
(e) Static slack for remaining operations (SSRO): Static slack is given by: (Due date –
Remaining processing time/number of remaining operations). Here jobs are processed
in ascending order of the operations.
(f) Dynamic slack for remaining operations (DSRO): Dynamic slack is given by: (Due date
– expected time of remaining operations / number of remaining operations). Here the
jobs are done in ascending order of the ratio dynamic slack.

Basic Scheduling Problems:

The production planner may face certain problems while preparing production plans or Schedules.
Some important problems are discussed below:

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 69

 (a) Flow production scheduling for fluctuating demand (known smoothening problem),
(b) Batch production scheduling, when products are manufactured consecutively,
(c) The assignment problem,
(d) Scheduling orders with random arrivals and
(e) Product sequencing.

PRACTICAL PROBLEM
Problem: 1
A company has tow plants A and B with fixed cost of Rs. 50,000 and Rs. 70,000 respectively.
Both the plants are designed produce up to 10,000 units each. The variable cost of two plants at
difference of production are as follows:

Production (Units) Plant A (Rs.) Plant B (Rs.)

2,500 36,000 29,000
5,000 45,000 39,000
7,500 77,000 51,000
10,000 1,10,000 1,15,000

Find economic loading schedule.

Problem: 2
A company is setting an assembly line to produce 192 units per eight hour shift. The information
regarding work elements in terms of times and immediate predecessors are given

Work element Time (Sec) Immediate predecessors

A 40 None
B 80 A
C 30 D, E, F
D 25 B
E 20 B
F 15 B
G 120 A
H 145 G
I 130 H
L 115 C,I
Tota l 720

(i) What is the desired cycle time?

(ii) What is the theoretical number of stations?
(iii) What are the efficiency and balance delay of the solution obtained?

70 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 3
The processing times (t) in hrs for the five jobs of single machine scheduling is given. Find the
optimal sequence which will minimize the mean flow time and find the mean flow time. Determine
the sequence which will minimize the weighted mean flow time and also find the mean flow time.
Weights are 1,2,1,2,3 respectively

Job(i) 1 2 3 4 5
Processing time (t) hrs 30 8 10 28 16

Problem: 4
The processing times and due dates of jobs for a single machine scheduling is given.

Job (j) 1 2 3 4 5 6 7
Processing time (tj) 10 8 8 7 12 15 18
Due date (dj) 15 10 12 11 18 25 30

Determine the sequence which will minimize the maximum lateness and also determine the
maximum lateness with respect to the optimal sequence.

Problem: 5
The processing times for five jobs and their due dates are given for a single machine scheduling
below.

Job (j) 1 2 3 4 5
Processing time (tj) hrs 9 7 5 11 6
Due date (in days) (dj) 16 20 25 15 40

(a) Determine the sequence

(b) Total completion time.
(c) Average completion time.
(d) Average number of jobs in the system and average job latness using the following priority
sequencing rules.
(i) Shortest Processing Time (SPT)
(ii) Earliest Due Date (EDD)
(iii) Longest Processing Time (LPT)
(e) Compare the above characteristics for the three sequencing rules.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 71

Problem: 6
The following jobs are waiting to be processed in a turning shop today (July, 23). The estimates of
the time needed to complete the jobs are as follows:

Jobs (j) Due date Processing time (tj) in days

1. July, 31 9
2. August, 2 6
3. August, 16 24
4. July, 29 5
5. August, 30 30

Sequence the jobs based on the minimum critical ratio.

Problem: 7
A company has 8 large machines which receive preventive maintenance. The maintenance team
is divided into 2 crews A and B. Crew A takes the machine power and replaces parts as per given
maintenance schedule. The second crew resets and puts back into operation.

Machine a b c d e f g H
Crew A 5 4 22 16 15 11 9 4
Crew B 6 10 12 8 20 7 2 21

Determine the optimal sequence of scheduling the factory maintenance crews to minimize their
idle times and represent it on the Gantt chart.

Problem: 8
The following is a tentative master schedule for 4 weeks at a small company

Product 1 2 3 4
A 2000 4000 1000 2000
B 3000 1000 4000 3000

The labour in the key work centers for the company’s two major products is as follows:
Product:
Dept. A B
4 0.21 0.07
11 0.06 0.10
14 0.11 0.08

Determine the load on department 4 over the next 4 weeks.

72 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 9
A company plans to fill six positions. Since the positions are known to vary considerably with
respect to skill and responsibility, different types of aptitude tests and interviews are required
for each. While the aptitude tests are conducted by people from the clerical positions, the lob
interviews are held by the personnel from the management cadre. The job interviews immediately
follow the aptitude test. The time required (in minutes) by each of the positions is given here,

Position P1 P2 P3 P4 P5 P6
Aptitude Test 140 180 150 200 170 100
Job Interview 70 120 110 80 100 90

If it is desired to minimize the wailing time of the management personnel, in what order the
position filling be handled?

Problem:10
Provide the optimum job sequencing involving three machines M1 , M2 , M3 for following:

JOB j1 j2 j3 j4 j5
M1 7 12 11 9 8
Time: M2 8 9 5 6 7
M3 11 13 9 10 14

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 73

 LINEAR PROGRAMMING

Problem on Formulation:-
Problem: 1
A furniture firm manufactures chairs and tables, each requiring the use of three machines A, B
and C. Production of one chair requires 2 hours on machine A, 1 hour on machine B, and 1 hour
on machine C. Each table requires 1 hour each on machines A and B and 3 hours on machine C.
The profit realized by selling one chair is ` 30, while for a table the figure is ` 60. The total time
available per week on machine A is 70 hours on machine B is 40 hours, and on machine C is 90
hours. How many chairs and tables should be made per week so as to maximize profit? Develop
a mathematical formulation.

Problem: 2
A diet is to contain at least 400 units of carbohydrate, 500 units of fat, and 300 units of protein.
Two foods are available: F1, which costs ` 2 per unit, and F2, which costs ` 4 per unit. A unit of
food F1 contains 10 units of carbohydrate, 20 units of fat, and 15 units of protein; a unit of food
F2 contains 25 units of carbohydrate, 10 units of fat, and 20 units of protein. Find the minimum
cost for a diet that consists of a mixture of these two foods and also meets the minimum nutrition
requirements. Formulate the problem as a linear programming problem.

Problem: 3
A company makes two kinds of leather belts, A and B. Belt A is a high quality belt, and B is of
lower quality. The respective profits and `4 and `3 per belt. Each belt of type A requires twice as
much time as a belt of type B, and, if all belts were of type B, the company could make 1000 per
day. The supply of leather is sufficient for only 800 belts per day (both A and B combined). Belt
A requires a fancy buckle, and only 400 per day are available. There are only 700 buckles a day
available for belt B.
What should be daily production of each type of belt? Formulate the problem as a linear
programming problem.

Problem: 4
A city hospital has the following minimal daily requirement for nurses:

Period Clock time (24 hours day) Minimal Number of Nurses Required
1 6 a.m. – 10 a.m. 2
2 10 a.m. – 2 p.m. 7
3 2 p.m. – 6 p.m. 15
4 6 p.m. – 10 p.m. 8
5 10 p.m. – 2 a.m. 20
6 2 a.m. – 6 a.m. 6

Nurses report to the hospital at the beginning of each period and work for 8 consecutive hours.
The hospital wants to determine the minimal number of nurses to be employed so that there will
be sufficient number of nurses available for each period. Formulate this as a Linear Programming
Problem by setting up appropriate constraints and objective function. Do not solve.
74 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
Problem: 5
The manager of an oil refinery must decide on the optimal mix of two possible blending
processes of which the inputs and outputs per production run are as follows:

Inputs (units) Outputs (units)

Process Crude A Crude B Gasoline X Gasoline Y
1 4 3 4 7
2 5 6 5 5

The maximum amounts available of crudes A and B are 225 units and 200 units respectively.
Market demand shows that at least 150 units of gasoline X and 120 units of gasoline Y must
be produced. The profits per production run from process 1 and process 2 are ` 200 and ` 300
respectively. Formulate the problem as a LPP problem.

Problem: 6
A retired person wants to invest upto an amount of ` 20,000 in the fixed income securities. His broker
recommends investing in two bonds, A and B. Bond A yields 10% return on the amount invested and bond
B yields 15% return on the amount invested. After some consideration, he decides to invest at least ` 5000
in bond A and at the most ` 8000 in bond B. He also wants that the amount invested in bond A must be at
least equal to the amount invested in bond B. What should his broker recommend if he wants to maximize
his return on investment? Formulate the problem mathematically.

Problem: 7
A person is interested in investing ` 50,00,000 in a mix of investments. The investment choices and
expected rates of returns on each one of them are:

Investment Expected rate of Return

Mutual Fund A 0.12
Mutual Fund B 0.09
Money Market Fund 0.08
Government Bonds 0.085
Share Y 0.16
Share X 0.18

The investor wants at least 35 per cent of his investment in government bonds. Because of the
higher perceived risk of the shares, he has specified that the combined investment in these not to
exceed ` 80,000. The investor also has specified that at least 20 per cent of the investment should
be in the money market fund and that the amount of money invested in shares should not exceed
the amount invested in mutual funds. His final investment condition is that the amount invested
in mutual fund A should be no more than the amount invested in mutual fund B. The problem is
to decide the amount of money to invest in each alternative so as to obtain the highest annual
total return. Formulate the problem as a linear programming problem.

Problem: 8
A company manufacturing television sets and radios has four major departments: chassis, cabinet,
assembly and final testing. Monthly capacities are as follows:

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 75

 Television Capacity Radio Capacity
Chassis 1,500 or 4,500
Cabinet 1,000 or 8,000
Assembly 2,000 or 4,000
Testing 3,000 or 9,000

The contribution of television is ` 150 each and the contribution of radio is ` 25 each. Assuming
that the company can sell any quantity of either product, determine the optimal combination of
output.

Problem: 9
A media specialist plans to allocate advertising expenditure in three media where unit costs of a
message are ` 1,500, ` 1,250 and ` 1,000 respectively. The total advertisement budget available
for the year is Rs. 50,000. The first medium is monthly magazine and it is desired to advertise not
more than once in one issue. At least five advertisements should appear in the second medium
and the number of advertisements in the third medium should strictly lie between 6 and 10. The
effective audience for unit advertisement in the three media is given below:

Medium 1 2 3
Expected effective audience 50,000 40,000 25,000
Formulate a linear programming problem to find the optimum allocation of advertisements is
three media that would maximize the total effective audience.

Problem: 10
Shyam, an Agriculturist, has a farm with 125 acres. He produces radish, peas and potato. Whatever
he raises is fully sold in the market. He gets ` 5 for radish per kg.,` 4 for peas per kg and ` 5 for
potato per kg. The average yield is 1500 kg of radish per acre, 1800 kg of peas per acre and 1200
kg of potato per acre. To produce each 100 kg of radish and peas and to produce each 80 kg of
potato a sum of Rs. 12.50 has to be used for manure. Labour required for each acre to raise the
crop is 6 man days for radish and potato and each 5 days for peas. A total of 500 man days of
labour at a rate of ` 40 per man day are available. Formulate this as a linear programming model
to maximize the Agriculturist’s total profit.

Problem: 11
A pharmaceutical company has 100 kg of A, 180 kg of B and 120 kg of C available per month.
They can use these materials to make three basic pharmaceutical products, viz., 5 -10 - 5, 5 - 5 -
10 and 20 - 5 - 10, where the numbers in each represent the percentage by weight of A, B and C
respectively n each of the products. The cost of these ingredients are given below:

Ingredient Cost per kg (`)

A 80
B 20
C 50
Inert ingredients 20

76 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Selling prices of these products are ` 40.50, ` 43 and ` 45 per kg respectively. There is a capacity
restriction of the company for the product 5 - 10 - 5 so as they cannot produce more than 30
kg per month. Determine how much of each of the products they should produce in order to
maximize their monthly profit.

Problem: 12
The meat department of a super market deals in three types of meat, say, A, B and C. The manager
of the department finds that he has 240 pounds of A, 900 pounds of B and 450 pounds of C on a
Saturday morning. From past experience, he knows that he can sell two third of these quantities
as straight cuts. The remaining meat will have to be ground into hamburger patties and picnic
patties for which there is a long weekend demand. Each pound of hamburger patties contains
20% A and 60% B. Each pound of picnic patties contains 50% B and 30% C. The remainder of each
product consists of an inexpensive non-meat filler which is available in unlimited quantities. How
many pounds of each product should be made so that the maximum amount of meat is used?

Problem: 13
The daily Florist company is planning to make up floral arrangement for the upcoming festival.
The company has available the following supply of flowers at the costs shown:

Type Number available Cost per flower (`)

Red roses 800 0.20
Garnenias 456 0.25
Carnations 4,000 0.15
White roses 920 0.20
Yellow roses 422 0.22

These flowers can be used in any of the four popular arrangements whose make up and selling
prices are as follows:

Arrangement Requirements Selling price

Economy 4 red roses `6
2 garnenias
8 carnations
May time 8 white roses `8
5 garnenias
10 carnations
4 yellow roses
Spring colour 9 red roses ` 10
10 carnations
9 white roses
6 yellow roses
Deluxe rose 12 red roses ` 12
12 white roses
12 yellow roses

How many units of each arrangement should be made up in order to maximize profits, assuming
all arrangements can be sold.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 77

Problem: 14
Rajan’s mathematics teacher has given him three very long lists of problems with the instruction
to submit no more than 100 of them (correctly solved) for credit. The problems in the first set are
worth 5 points each, those in the second set are worth 4 points each, and those in the third set
are worth 6 points each. Rajan knows from experience that he requires on the average 3 minutes
to solve a 5-point problem, 2 minutes to solve a 4-point problem, and 4 minutes to solve a 6-point
problem. Because he has other subjects to worry about, he can not afford to devote more than
3½ hours altogether to this mathematics assignment. Moreover, the first two sets of problems
involve numerical calculations and he knows that he cannot stand more than 2½ hours of work on
this type of problem. Under these circumstances, how many problems in each of these categories
shall he do in order to get maximum possible credit for his efforts?

Problem: 15
A scrap-metal dealer has received a bulk order from a customer for supply of 2000 kgs of scrap
metal. The customer has specified that at least 1000 kgs of the order must be of high quality
copper that can be melted easily and can be used to produce tubes. Further, the customer has
specified that the order should not contain more than 10 per cent of the total order that is unfit
for any commercial use.

Source A Source B
Copper 40% 75%
Unfit scrap 7.5% 10%

The cost of metal purchased from source A and source B are ` 12.50 and ` 14.50 per kg respectively.
Determine the optimum quantities of metal to be purchased from the two sources by the scrap
metal dealer so as to minimize the total cost.

Problem: 16
A farmer has a 100 acre farm. He can sell all the tomatoes, lettuce or radishes he can raise. The
price he can obtain is ` 5 per kg for tomatoes, ` 2 per kg for lettuce and ` 3 per kg for radishes.
The average yield per acre is 2,000 kgs of tomatoes, 3,000 kg of lettuce and 1,000 kgs of radishes.
Fertilizer is available at Rs. 2 per kg and the amount required per acre is 100 kgs each for tomatoes
and lettuce and 50 kg for radishes. Labour required for sowing, cultivating and harvesting per acre
is 5 man-days each for tomatoes and radishes and 6 man-days for lettuce. A total of 400 man-days
of labour are available at ` 20/- per man-day. Formulate this problem as a linear programming
model to maximize the farmer’s total profit.

Problem: 17
A owner of metro sports wishes to determine to how many advertisement in to place in the
selected three magazines A, B, and C. His objective is to advertise in such a way that total
exposure to principal buyers of expensive sports goods is maximized. Percentage of readers for
each magazine are known. Exposure in any particular magazine is the number of advertisement
placed multiplied by the principal buyers. The following may be used :

A B C
Readers (lakhs) 1 0.6 0.4
Principal buyers (in %) 10 15 7
Cost per Advertisement (`) 5000 4500 4250
78 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
The budgeted amount is at most ` 1 lakh for the advertisement . The owner has already decided
that magazine A should have no more than 6 advertisement and B and C each have at least two
advertisement. Formulate only LPP (June 2003)

Problem: 18
Fenton paint ltd manufactures three grade of paints – Venus , Diana , and Aurota. The plant
operates three shift basis and following data are made available from the production records :

Requirement of Grade Available

resources Venus Diana Aurota capacity/month
Special additive 0.30 0.25 0.75 650 tonnes
(Kg/litre)
Milling (kilo ltr 2.50 3.50 5.00 110 mach.shift
per machine
shift)
Packing 12.00 12.00 12.00 100 shift
(kilo ltr per shift)

There are no limitations on other resources. The particulars of sale forecasts and estimated
contribution to overheads and profits are given below:

Venus Diana Aurota

Maximum possible sales/ month 120 450 600
(kilo ltr)
Contribution ( ` per kilo ltr) 4000 3600 2500

Formulate LPP for Maximize contribution. (Dec 2003)

Problem: 19
In a factory three products A, B, and C are produced. There is the possibilities of applying two
strategies – produce all the three items or any two of them . Product A and C passes through
shops l and ll whereas B is further processed in shop lll . Each has limited available hours. Profit
per unit of A ,B and C is ` 27 , ` 29, and ` 25 respectively. Hours available in shopes 1, 11, 111 are
162 hrs 189 hrs and 5 hrs respectively. The following table gives the processing time of different
item in different shops :

Shops Items
A B C
1 27 12 12
11 27 15 25
111 0 3 0

Formulate LPP to maximize profit. (Dec 2004)

Problem: 20
For a company engaged in manufacturing of three Products A, B , C, the available data is given
below:
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 79
 Minimum sale requirement per month of A, B , and C 20 , 40 and 60 respectively
Operation Hrs required per item of total available hours per month

Process A B C Available Hrs

1 2 4 4 800
2 4 2 2 880
3 6 2 4 720

Profit per unit of A, B and C are ` 20 , ` 30 and ` 16 . Formulate LPP to maximize profit.
(Dec 2005)

Problem: 21
A manufacturing company produces three type of equipments W1, W2 and W3. All the type of
equipment are first required machining work followed by assembly. The time required for three
types of equipment are as under:

Types of equipment Machine time(hrs) Assembly time(hrs)

W1 15 4.4
W2 13 3.5
W3 12 4.0
Total time available/ 4000 1240
month(hrs)

Selling Price(`) Expenses(`)

W1 11000 8000
W2 5000 2400
W3 3000 1500

Total cash available for meeting all expenses is Rs 1,30,000. Formulate as LPP to maximize profit.
(June 2006)

Problem: 22
A animal feed company must produce 200 Kg of mixture consisting of ingredient X and Y daily.
Cost of ingredient of X and Y are Rs 3 per Kg and Rs 8 per Kg respectively. No more than 80 Kg of
X can be used and at least 60 Kg of Y must be used . Formulate as LPP. (Dec 2006)

Problem: 23
Optimax Mutual fund Company has ` 30 lakh available for investment in Government Bonds ,
Blue Chips stock, speculative stocks and short term deposits. The annual expected return and risk
factor are given below:

Types of Investment Annual expected return(%) Risk Factor(0 to 100)

Govt. Bond 12 12
Blue chip stock 20 24

80 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 Speculative stock 24 48
Short term deposit 10 6

Mutual fund is required to keep at least ` 4 lakh in short term deposits and not to exceed average
risk factor of 42 . Speculative stocks must be at most 20%oftotal amount invested . Formulate LPP
to maximize return. (June 2007)

Problem: 24
Four product A, B , C and D have ` 5, ` 7 , ` 3 and ` 9 profitability respectively. First type of material
(limited supply of 800 Kg) is Required by A ,B C and D at 4Kg , 3Kg, 8Kg and 2Kg respectively per
unit Second type of material has a limited supply of 300 Kg and is for A, B, C and D at 1Kg , 2Kg ,
0Kg and 1kg per unit .Machine hour available are 500 hrs and requirement are 8, 5,0, and 4 hrs
for A,B,C and D each per unit . Labour hrs available 900 hrs and requirement are 3, 2, 1, and 5 hrs
for A, B, C and D respectively. Formulate LPP to Maximise profit. (Dec 2007)

Problem: 25
A company manufactures item X1 and X2 and sold on profit of ` 35 per unit and ` 25 per unit
respectively. X1 requires 3 Kg of materials and 4 man hrs and 2 machine hrs per unit. X2 requires
2 Kg of materials, 3 man hrs and 2 machine hrs per unit. During production there are 350 Kg of
materials, 600 man hrs and 550 machine hrs available for use. Formulate LPP. (June 2009)

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 81

 LINEAR PROGRAMMING
(GRAPHICAL METHOD)

Problem: 1
Maximize Z = 10x + 6y
Subject to 3x + y ≤ 12
2x + 5y ≤ 34
x, y ≥ 0

Problem: 2
Solve the following linear programming problem graphically;
Maximize Z = 4x + 6y
Subject to the constraints: x + y = 5
x ≥ 2
y ≤ 4
x, y ≥ 0

Problem: 3
Using graphic method, find the maximum value of
Maximize Z = 7x + 10y
Subject to x + y ≥ 30000
y ≤ 12000
x ≥ 6000
x≥y
x, y ≥ 0

Problem: 4
The standard weight of a special purpose brick is 5 kg and it contains two basic ingredients B1 and
B2. B1 costs Rs. 5 per kg and B2 costs Rs. 8 per kg. Strength considerations dictate that the brick
contains not more than 4 kg of B1 and minimum of 2 kg of B2. Since the demand for the product
is likely to be related to the price of the brick, find the minimum cost of brick satisfying the above
conditions.

Problem: 5
A farm is engaged in breeding pigs. The pigs are fed on various products grown on the arm. In
view of the need to ensure certain nutrient constituents, it is necessary to buy two additional
products, say A and B.
The content of the various products (per unit) in nutrient constituent (e.g., vitamins, proteins,
etc.) is given in the following table:

82 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 Nutrient Nutrient content in product Minimum amount of nutrient
A B
M1 36 6 108
M2 3 12 36
M3 20 10 100

The last column of the above table gives the minimum amounts of nutrient constituents M1,
M2 and M3 which must be given to the pigs. If products A and B cost Rs. 20 and Rs. 40 per unit
respectively, how much of each of these two products should be bought so that the total cost is
minimized? (Use graphic method).

Problem: 6
To maintain his health a person must fulfill certain minimum daily requirements for several kinds
of nutrients. Assume that there are only three kinds of nutrients—calcium, protein and calories
and the person’s diet consists of only two food items, I and II, whose price and nutrient contents
are shown in the table below:

Food I Food II Min daily requirement for

(Per lb) (Per lb) the nutrient
Price (Rs.) 0.60 1.00
Calcium 10 4 20
Protein 5 5 20
Calories 2 6 12

What combination of the two food items will satisfy the daily requirement and entail the least
cost?

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 83

 LINEAR PROGRAMMING –
THE SIMPLEX METHOD

Solve by Simplex Method

Problem: 1
A firm makes two types of furnitures, chairs and tables. Profits are Rs. 20 per chair and Rs. 30 per
table. Both products are processed on three machines M1, M2, and M3. The time required for each
product in hours and total time available in hours per week on each machine are as follows:

Machine Chair Table Available Time

M1 3 3 36
M2 5 2 50
M3 2 6 60

How should the manufacturer schedule his production in order to maximize profit? (Use simplex
method).

Problem: 2
Two materials A and B are required to construct tables and book cases. For one table 12 units of
A and 16 units of B are needed while for a book case 16 units of A and 8 units of B are required.
The profit on a book case is Rs. 25 and Rs. 20 on a table. 100 units of material A and 80 units of B
are available. How many book cases and tables be produced to have maximum profit?
Formulate this as a linear programming problem and solve by simplex method.

Problem: 3
Following data are available for a firm which manufactures three items A, B and C:

Time Required in Hours

Product Profit in Rs.
Assembly Finishing
A 10 2 80
B 4 5 60
C 5 4 30
Firm’s capacity 2000 1009

Express the above data in the form of linear programming problem to maximize the profit from
the production and solve it by simplex method.

Problem: 4
Maximize subject to Z = 80x + 100y
20x + 30y ≤ 3
60x + 40y ≤ 4
x, y ≥ 0.

84 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 5
Maximize Z = 3x + 4y
Subject to, x + y ≤ 12
5x + 2y ≥ 36
7x + 4y≥ 14
x ,y ≥ 0

Problem: 6
Maximize Z = 3x + 2y
Subject to, x–y≤4
–x + y = 4
x≥6
x, y ≥ 0

Problem: 7
Use the simplex method to minimize Z = 8x + 12y
Subject to 2x + 2y ≥ 1
x + 3y ≥ 2
x, y ≥ 0

Problem: 8
Minimize Z = 2x1 + 3x2 + 6x3
Subject to constraint x1 + 4x2 + 2x3 ≥ 8
3x1 + 2x2 ≥ 6
x1, x2, x3 ≥ 0

Problem: 9
A diet for a sick person must contain at least 4000 units of vitamins, 50 units of minerals and 1400
units of calories. Two foods A and B are available at a cost of Rs.4 and Rs.3 per unit respectively.
If one unit of A contains 200 units of vitamins, 1 unit of mineral and 40 calories and one unit of B
contains 100 units of vitamins, 2 units of minerals and 40 calories, find by simplex method, what
combination of food be used to have least cost?

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 85

 TRANSPORTATION
Problem: 1
Board lather shop has three manufacturing plants and four sales outlets. Data of daily demand
at various sales outlets and supply from various plants along with transportation cost per unit
between plants and sales outlets are given in the following table. Determine the Initial Basic
Feasible Solution (IBFS) by using (i) North West Corner Rule (ii) Least cost Method (ii) Vogel’s
Approximation method.

Sales outlets
Plants Supply
1 2 3 4
1 10 2 20 11 15
2 12 7 9 20 25
3 4 14 16 18 10
Demand 5 15 15 15

Problem: 2
Obtain the initial basic feasible solution of the following by using (i) North-West Corner Rule (ii)
Least Cost Method and (iii) Unit cost penalty method. Transportation cost pre unit from source to
destination is as follows:

Destinations
Source Supply
D1 D2 D3 D4
S1 2 3 11 7 6
S2 1 0 6 1 1
S3 5 8 15 9 10
Demand 7 5 3 2

Problem: 3
Clerk has obtained an initial basic feasible solution to the transportation problem in a following
format. Is this solution an optimum solution? If not, obtain the optimum solution.

Warehouses
Factories 1 2 3 4 Supply
5 2
1 19 30 50 10 7
7 2
2 70 30 40 60 9
3 8 10
40 8 70 20 18
Requirements 5 8 7 14

86 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 4
Amit Enterprise has three plants and four warehouses. The initial solution with supply and
demand in units and the corresponding transportation costs are given below.

Warehouses
Plants Supply
I II III IV
10 5
A 5 10 4 10

20 5
B 6 8 7 2 25

5 10 5
C 4 2 5 7 20

Demand 25 10 15 5

Problem: 5
Tata indicom has manufacturing plants at Andheri, Bandra and Colaba. These plants have
availability of 35, 42 and 48 pieces of telephone instruments, respectively. the retail outlets
at Mulund, Malad and Jogeshwari require 50, 38, 37 pieces of instruments, respectively. the
transportation cost unit between each plant and outlet is given below.

Plants/Retail outlets Mulund Malad Jogehswari

Andheri 9 4 7
Bandra 8 12 11
Colaba 3 6 13

Calculate optimum solution.

Problem: 6
Stronghold Construction Company is interested in taking loans from banks for some of its projects
P, Q, R, S, T. The rates of interest and the lending capacity differ from bank to bank. All these
projects are to be completed. The relevant details are provided in the following table. Assuming
the role of a consultant, advise this company as to how it should take the loans so that the total
interest payable will be the least.

Bank Interest rate in Max. Credit

percentage for project (in thousands)
P Q R S T
Pvt. Bank 20 18 18 17 17 100
Nationalized bank 16 16 16 15 16 400
Co-operative Bank 15 15 15 13 14 250
Amount required 200 150 200 125 75
(in thousands)

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 87

Problem: 7
A company has three warehouses W1, W2 and W3, It is required to deliver a product from these
warehouses to three customers A, B and C. The warehouses have the following units in stock.

Warehouses W1 W2 W3
No. of units 65 42 43

And Customer requirements are:

Customer A B C
No. Units 70 30 50

The table given below shows the costs of transporting one unit form warehouses to the customer.

Warehouse
W1 W2 W3
Customer

A 5 7 8
B 4 4 6
C 6 7 7

Find the optimum transportation route.

Problem: 8
A company ahs four factories situated in four different location in the country and four sales
agencies located in four other locations in the country. The cost of production (Rs. Per unit), the
sale price (Rs. Per unit) shipping cost (Rs. Per unit) in the cells of matrix, monthly capabilities and
monthly requirements are given below:

Sales Agency Monthly Cost of

Factory 1 2 3 4 Capacity (units) Productions
A 7 5 6 4 10 10
B 3 5 4 2 15 15
C 4 6 4 5 20 16
D 8 7 6 5 15 15
Monthly
Requirement (units) 8 12 18 22
Sales Price 20 22 25 18

Calculate IBFS by VAM

Problem: 9
ABC Enterprise is having three plants manufacturing dry-cells, located at different locations.
Production cost differs from plant to plant. There are five sales offices of the company located in
different regions of the country. The sales prices can differ from region to region. The shipping
cost from each plant to each sales office and other data are given by following table.

88 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 Production Data Table
Production cost Max. capacity in Plant No.
Per Unit no. of units
20 150 1
22 200 2
18 125 3

Shipping cost and demand & Sales Price Table:

Shipping Costs

Sales Office1 Sales Office 2 Sales Office 3 Sales Office 4 Sales Office 5
Plant 1 1 1 5 9 4
Plant 2 9 7 8 3 6
Plant 3 4 5 3 2 7

Demand & Sales Prices:

Sales Office 1 Sales Office 2 Sales Office 3 Sales Office 4 Sales Office 5
Demand 80 100 75 45 125
Sales Price 30 32 31 34 29

Find the production and distribution schedule most profitable to the company.

Problem: 10
A company has 3 plants and warehouses. The cost of sending a unit from different plants to the
warehouses, production at different plants and demand at different warehouses are shown in the
following cost matrix table:

Warehouse
Plants Productions
A B C
X 8 16 16 152
Y 32 48 32 164
Z 16 32 48 154
Demand 144 204 82

Determine a transportation schedule, so that the cost is minimized. Assume that the cost in the
cost matrix is given in thousand of rupee.

Problem: 11
A company produces a small component for all industrial products and distributes it to fix
wholesalers at fixed price of Rs. 2.50 per unit. Sales forecasts indicate that monthly deliveries
will be 3,000, 10,000, 5,000 , 5500 and 4,000 units to wholesalers 1, 2, 3, 4 and 5 respectively.
The monthly production capabilities are 5,000 10,000, 12,500 at plans, 1, 2 and 3 respectively.
The direct costs of production of each unit are Rs. 1.00, Rs. 0.90 and Rs. 0.80 at plants 1, 2 and
3 respectively. the transportation costs of shipping a unit from a plant to a wholesaler are given
below:
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 89
 Wholesaler
Plant
1 2 3 4 5
1 0.05 0.07 0.10 0.15 0.15
2 0.08 0.06 0.09 0.12 0.14
3 0.10 0.09 0.08 0.10 0.15

Find how many components each plant supplies to each wholesaler in order maximize profit.

Problem: 12
A product is manufactured by four factories A, B, C and D. the unit production costs are ` 2, ` 3,
` 1 and ` 5 respectively. their daily production capacities are 50, 70, 30 and 50 units respectively.
these factories supply the product to four stores P, Q, R and S. the demands made by these stores
are 25, 35, 105 and 20 units respectively. Unit transportation cost in rupees from each factory to
each store is given in the following table:

Stores
Factories
P Q R S
A 2 4 6 11
B 10 8 7 5
C 13 3 9 12
D 4 6 8 3

Determine the extent of deliveries from each of the factories to each of the stores so that the
total cost (production and transportation together) is minimum.

Problem: 13
National Oil Company has four refineries and five depots. Transportation costs per unit, capacities
and requirements are as follows.

Depots
Refineries D1 D2 D3 D4 D5 Capacity (tons)
R1 9 12 10 10 6 150
R2 5 18 12 11 2 30
R3 10 M 7 3 20 120
R4 5 6 2 M 8 130
Requirement (tons) 80 60 20 210 80

How should the company arrange to transport the units so that the transportation cost is
minimized?

Problem: 14
A leading firm has three auditors. Each auditor can work up to 160 hours during the next month,
during which time three projects must be completed. Project I will take 130 hours, project 2 will
take 140 hours, and the project 3 will take 160 hours. The amount per hour that can be billed for
assigning each auditor to each project is given in Table A.

90 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 Table A

Project
Auditor
1 2 3
1 1,200 2,500 1,900
2 1,400 1,300 1,200
3 1,600 1,400 1,500

Formulate this as a transportation problem and find the optimal solution. Also find out the
maximum total billings during the next month.

Problem: 15
A company wishes to determine an investment strategy for each of the next four years. Five
investment types have been selected, investment capital has been allocated for each of the
coming four years, and maximum investment levels have been established for each investment
type. An assumption is hat amounts invested in any year will remain invested until the end of the
planning horizon of four years. The following table summarizes the data for this problem. The
values in the body of the table represent net return on investment of one rupee up to the end of
the planning horizon. For example, a rupee invested in investment type B at the beginning of year
1 will grow to ` 1.90 by the end of the fourth year, yielding a net return of Rs. 0.90.

Investment made Investment Type Rupees

at the beginning A B C D E Available
of year NET RETURN DATA (in 000’s)
1 0.80 0.90 0.60 0.75 1.00 500
2 0.55 0.65 0.40 0.60 0.50 600
3 0.30 0.25 0.30 0.50 0.20 750
4 0.15 0.12 0.25 0.35 0.10 800
Maximum Rupees
Investment (in 000’s) 755 600 500 800 1,000

The objective in this problem is to determine the amount to be invested at the beginning of each
year in an investment type so as to maximize the net rupee return for the four-year period.
Solve the above transportation problem and get an optimal solution. Also calculate the net
return on investment for the planning horizon of four-year period.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 91

 ASSIGNMENT

INTRODUCTION THEORY
The assignment problems originates from the classical problem where the objective is to assign
a number of origins (jobs) to equal number of destination (persons) at a minimum cost (or
maximum profit).
Let us suppose there are ‘n’ jobs to be performed and ‘n’ persons are available for doing
these jobs. Assume that each person can do at a time, though with varying degree of efficiency.
Let cij be the cost (payment) if the ith person is assigned the jth job. The problem is to find an
assignment (which job should be assigned to which person. So that the total cost for performing
all jobs is minimum. Problems of this kind are known as assignment problems. For other types of
assignment problems we may cite example of assigning men to office, drivers to trucks to delivery
routes, classes to rooms, sales man to different sales areas, problems to research teams, etc.
Thus, in assignment problem, the objective is to assign a no. of person can associate to the
same number of jobs at a minimum total cost. The assignment is to be made on one to one basis.
That is, each person can associate with one and only one job.
This feature implies the existence of two specific characteristics in an assignment problem.
Firstly, the cost matrix for the given problem is a square matrix. Secondly, the optional solution of
the problem is such that there can be one and only one assignment in a given row or column of
the given cost matrix.
Let cij be the cost (payment) if the ith person is assigned the jth job.
Then the assignment problem can be stated in the form of n * n matrix [cij] of real number,
called the cost effectiveness matrix as given below:
Jobs
1 2 j --- n
1 C11 C12 Cij --- C1n
persons 2 C21 C22 C2j --- C2n
i Ci1 Ci2 Cij --- Cin
n Cn1 Cn2 Cnj --- Cnj

ASSIGNMENT ALGORITHMS
(HUNGARIAN ASSIGNMENT METHOD)
Various steps of the computational procedure for obtaining an optional assignment may be stated
as follows:
Step 1: Select lowest element of each row and Subtract the lowest element (cost) from cost
matrix (cij) from every element of the respective row.
Step 2: Select lowest element from each column from reduced matrix(obtained after 1st step)
and Subtract the lowest element from every element of the respective column.
Step 3: Cover all the zeroes in the reduced cost matrix as obtained in step 2 with minimum possible
number of horizontal and vertical lines.

92 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Let the number of these lines be N. Now there may be two possibilities:
1. If N = n, the dimension of the cost matrix i.e. if the number of such lines equals to the
dimensions of the matrix, then the reduced cost matrix can be taken as starting reduced
cost matrix. After this we should go to step 6.
2. If N < n, i.e. if the number of covering lines is not equal to the dimension of the matrix,
then go to step 4.
Step 4: select the smallest element (cost) in the reduced cost matrix from uncovered by lines as
obtained in step 3, then
(i) Subtract the smallest element from all the elements which are not covered by the line,
and
(ii) Add the same to all the elements which occur at the intersection of the covering lines.
The second modified cost matrix is thus obtained.
Step 5: Repeat the step 3, until the number of covering lines becomes equal to the dimension of
the matrix i.e. until we get N = n. Then we go to step 6.
Step 6: Starting with row 1 of the matrix obtained in step 3 or in step 5, examine the rows
successively until a row containing only one zero is found. Mark at this zero which means that an
assignment has been made there. Then the mark a cross (×) over all zeros if lying in the column
of the marked zero, showing that they cannot be considered for future assignment. Continue in
this manner until the rows have been examined. Repeat the same procedure for columns also.
Step 7: Repeat the step 6 successively until the process ends the following situations arise:
(i) If no unmarked zero is left, then the process ends as the optional assignment is obtained.
(ii) If there lie more than one unmarked zero and column. Repeat the process until no
unmarked zero is left in the new reduced cost matrix.

REMARK : READ AND REMEMBER

Unbalanced Assignment Problems Maximization Case In Assignment Problems
An assignment problem is called an Sometimes the Assignment problems deals
unbalanced assignment problem if number with maximization of profit, revenue etc. as
of row is not equal to number of column the objectives function. Such problems may be
i.e. whenever the number of job is not solved easily first converting it to a minimization
equal to the number of persons. Thus the problem and then applying the usual procedure
cost matrix in the case of an unbalanced of assignment algorithm. This conversion can be
assignment problem is not a square matrix. done by either of the following two ways.
In such cases dummy rows or columns with * Locate the highest payoff element in the given
Zero costs are added in the matrix so as to matrix and the then subtract all the element of the
form a square matrix. With this technique matrix from the highest element.
the problem reduces to the balanced * Put a negative sign before each of the Payoff
assignment and it can be solved by usual elements in the given matrix and then subtract
assignment algorithm. all the elements of the matrix from the highest
element
Step 8: Now, exactly one marked zero in each row and each column of the matrix is obtained. The
assignment corresponding to these marked zero will give the optional assignment.
After obtaining the optional assignment, the total actual cost can be calculated by adding the
values of cij ‘s in the assigned cell from the original cost matrix.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 93

Some Special Cases
Situation Treatment
Maximization a) select the Highest element in the given maximization matrix.
objective b) Subtract each element in the matrix from the highest element. This is
called the opportunity loss matrix. Continue the Assignment procedure
in this matrix.
*NOTE: The opportunity loss matrix should not have any negative elements.
Unbalanced Insert a dummy row or column, with all entries equal to zero.
matrix *NOTE: Insert dummy only after converting into opportunity loss matrix, if
required.
Prohibited a) Where a particular job cannot be assigned to a particular individual, it is
Assignment called prohibited Assignment (Restrictive condition).
(Restrictive b) Such routes are given a high cost “M”, where M = Infinity.
condition)
Condition a) Where a particular job should be assigned only to a particular individual,
Assignment it is called as Facilitative Condition.
(Facilitative b) Delete that row and column and reduce the matrix and continue the
condition) procedure.

Problems on Assignment Theory

Problem: 1
Cocoa Corporation has four plants each of which can manufacture any one of the four products.
Product costs differ from one to plant to another as follows:

Plant Product
1 2 3 4
A 33 40 43 32
B 35 28 31 23
C 42 29 36 29
D 27 42 44 38
Which product each plant should to minimise cost

Problem: 2
The HCL company has five jobs A, B, C, D, E to be done and five men L, M, N, O, P to do these jobs.
The number of hours each man would take to accomplish each job is given by the following table.

L M N O P
A 4 6 11 16 9
B 5 8 16 19 9
C 9 13 21 21 13
D 6 6 9 11 7
E 11 11 16 26 11
Find the optional schedule with for the above assignment problem.

94 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 3
Solve the assignment problem represented by the following given matrix.

a b c d e f
A 9 22 58 11 19 27
B 43 78 72 50 63 48
C 41 28 91 37 45 33
D 74 42 27 49 39 32
E 36 11 57 22 25 18
F 3 56 53 31 17 28

Problem: 4
[Introduction Dummy Variable] A transport corporation has three vehicles in three cities. Each
of vehicles can be assigned to any of the four other cities. The distance differs from one city to
another as under:

W X Y Z
A 33 40 43 32
B 45 28 31 23
C 42 29 36 29

Assign a vehicle to a city in such a way that the total distance is minimized.

Problem: 5
Solve the following unbalanced assignment problem of minimising total time for doing all the jobs:

Operator job
1 2 3 4 5
1 6 2 5 2 6
2 2 5 8 7 7
3 7 8 6 9 8
4 6 2 3 4 5
5 9 3 8 9 7
6 4 7 4 6 8

Problem: 6
To stimulate interest and provide an atmosphere for intellectual discussion, a finance faculty in
a management school decides to hold special seminars on four contemporary topics, leasing,
portfolio management, private mutual funds, swaps, and options. Such seminars should be
held once per week in the afternoons. However, scheduling these seminars (one for each topic,
and not more than one seminar per afternoon) has to be done carefully so that the number of
students unable to attend is kept to minimum. A careful study indicates the number of students
who cannot attend a particular seminar on a specific day is as follows:
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 95
 Day Leasing Portfolio Management Private Mutual Funds Swaps and Options
Monday 50 40 60 20
Tuesday 40 30 40 30
Wednesday 60 20 30 20
Thursday 30 30 20 30
Friday 10 20 10 30

Find an optional schedule of the seminars. Also find out the total number of student who will be
missing at least one seminar.

Problem: 7
[Assignment Problem on Swimming Style] Five swimmers are eligible to compare in a relay team
which is to consist of four swimmers swimming four different swimming styles; back stroke, breast
stroke, free style and butterfly. The time taken for the five swimmers –Anand, Bhaskar, Chandru,
Dorai and Easwer- to cover a distance of 100 meters in various swimming styles are given below
in minutes : seconds. Anand swims the back stroke in 1 : 09, the breast stroke in 1 : 15, and has
never competed in the free style or butterfly. Bhaskar is a free style specialist averaging 1: 01 .For
the 100 meters but can also swim the breast stroke in 1 : 16 and butterfly in 1 : 20. Chandru swims
all styles- back stroke 1 : 10, butterfly 1 : 12, free style 1 : 05, and breast stroke 1 : 20. Dorai swims
only the butterfly 1 : 11 while Easwar swims the back stroke 1 : 20, the breast stroke 1 : 16 and
the butterfly 1 : 10. Which swimmer should be assigned to which swimming style? Who will not
be in the relay?

Problem: 8
A solicitor firm employs typists on hourly piece basis for their daily work. There are few typists
for service and their charges and speeds are different. According to an earlier understanding only
one job is given to one typist and the typist is paid for full hours even if he works for a fraction of
an hour. Find the least cost allocation for the following data:

Typists Rate per hour No. Of pages job No.Of pages

(`) typed/hour
A 5 12 P 199
B 6 14 Q 175
C 3 8 R 145
D 4 10 S 298
E 4 11 T 178

Problem: 9
[Assignment of Rooms] well done company has taken the third floor of a multi-storeyed building
for rent with a view to locate one of their zonal offices. There are five main rooms in this floor to
be assigned to five managers. Each room has its own advantages and disadvantages. Some have
windows, some are closer to the washrooms or the canteen or secretarial pool. The rooms are of
all different sizes and shapes. Each of five managers were asked to rank their room preferences

96 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

amongst the rooms 301, 302, 303, 304 and 305. Their preferences were recorded in a table as
indicated below.

Manger
M1 M2 M3 M4 M5
302 302 303 302 301
303 304 301 305 302
304 305 304 304 304
301 305 303
302

Most of the managers did not list all the five rooms since they were not satisfied with some of
these rooms and they have left off these the list. Assuming that their preferences can be quantified
by numbers, find out as to which manger should be assigned to which rooms so that their total
preference ranking is a minimum.

Problem: 10
[Flight Scheduling] an aeroplane that operates 7 days a week follows time table. Crew must have
at least 6 hours layover time before starting a second flight. Crew will be stationed at a city that
result in smaller layover. Find the pairing of flights that minimises total layover period away from
station and also suggest the planning for stationing the crew.

Flight No. Delhi Depart. Srinagar Arrival Flight No. Srinagar Depart. Delhi Arrival
1 07.00 08.00 5 08.00 09.00
2 08.00 09.00 6 09.00 10.00
3 14.00 15.00 7 12.00 13.00
4 19.00 20.00 8 17.00 18.00

Problem: 11
(Maximization problem) J.P Corporation has four salesmen each of them can be assigned any of
four sales territories. Estimates of the sales in hundred of rupees for each salesman are as under:

salesman Sales Territories

1 2 3 4
A 65 78 83 60
B 85 52 59 44
C 83 56 69 64
D 49 80 85 84

Obtain the optional assigned pattern that maximises the sales revenue.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 97

Problem: 12
Imagine yourself to be the Executive Director of a 5-star Hotel which has four banquet halls
that can be used for all functions including wedding. The halls were all about the same size but
the facilities in each hall differed. During a heavy marriage season, 4 parties approached you to
reserve a hall for the marriage to be celebrated on the same day. These parties were told that
the first choice among these 4 halls would cost Rs.10,000 for the day. They were also required
to indicate the second, third and fourth preferences and the price they would be willing to pay.
Marriage A & D indicated that they won’t be interested in halls 3 & 4. Other particulars are given
in the following table:

Marriage Revenue per Hall

1 2 3 4
A 10,000 9,000 X X
B 8,000 10,000 8,000 5,000
C 7,000 10,000 6,000 8,000
D 10,000 8,000 X X

Where X indicated that the party does not want the hall.
Decide on an allocation that will maximise the revenue to your hotel.

98 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 QUEUING THEORY

The Queuing theory is also called the waiting line theory. The theory is applicable to situation
where the customers arrive at some service station for some service, wait (occasionally not) and
then leave the system after getting service.

GENERAL STRUCTURE OF QUEUING SYSTEM

General structure of queuing system

Situation Arriving Customers Service Facility
a) Passage of customers through Shoppers Checkout counters
Supermarket checkout
b) Flow of automobile traffic through Automobiles Road network
road network
c) Transfer of electronic messages Electronic message Transfer lines
d) Banking transactions Bank patrons Bank tellers
e) Flow of computer programmes Computer programme Central processing unit
through a computer system
f) Sale of theatre tickets Theatre- goers Ticket booking windows
g) Arrival of trucks to carry fruits and Trucks Loading crew and facilities
vegetables from a central market
h) Registration of unemployed at Unemployed Registration assistants
employment exchange personnel
i) Occurrence of fires Fires Firemen and Equipment
j) Flow of ships to the seashore Ships Harbour and docking Facilities
k) Calls at police control room Service calls Policemen

Arrival Process. The arrival from the input population may be classified on different bases as
follow:
I. According to source: The source of customers for queuing system can be finite. For
example, all people of a city or state (and others) could be the potential customers at
a super bazaar. The number of people being very large, it can be taken to be infinite.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 99

 On the other, there are many situations in business and industrial conditions where we
cannot consider the population to be infinite – it is finite. Thus, the ten machines in a
factory requiring repairs and maintenance crew would exemplify finite population.
II. According to number: The customers may arrive for service individually or in group.
Single arrivals are illustrates by customers visiting a beautician, students reaching at a
library counter, so on. On the other hand, families visiting restaurants, ship discharging
cargo at a dock are examples of bulk, or batch, arrivals.
III. According to time: Customers may arrive in the system at know (regulars or otherwise)
times, or they might arrive in a random way. The queuing models wherein customers’
arrival times are known with certainty are categorised as deterministic models (insofar
as this characteristic is concerned) and are easier to handle.
With random arrivals. The number of customer reaching the system per unit time might
be described by a probability distribution. Although the arrival might follow any pattern,
the frequently employed assumption, which adequately supports many real world
situation, is the arrivals are Poisson Distributed.

(a) Structure of the service system

By structure of the service system we mean how the service facilities exist. There are several
possibilities. For example , there may be
1) A Single Service Facility: A library counter is an example of this. The model that involve
a single service facility are called single server models.

Single Server, Single Queue Model

2) Multiple, Parallel Facilities with single queue: That is there is more than one server.
The term parallel implies that each server provides the same type of facility. Booking at
a service station that has several mechanics, each handling one vehicle, illustrates this
type of model, it is given in Fig.

Multiple, Parallel Servers, Single Queue Model

3) Multiple, Parallel Facilities with Multiple queues: This type of model is different from
the earlier one only in that each of the service has different queue. Different cash
counters in an electricity office where the customers can make payment in respect
100 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
 of their electricity bills provide an example of this type of model. Fig. Portrays such a
model.

4) Service Facilities in a series: In this, a customer enters the first station and gets a
portion of service and then moves on to the next station, gets some service and then
again moves on to the next station... and so on, and finally leaves the system, having
received the complete service. For example, machining of certain steel may consists of
cutting, tuning, knurling, drilling and packaging operation, each of which is performed
by a single server in a series. Fig. Shows such a situation.
Besides these, there may be other possibilities as well.

Multiple Service in Series

(b) Speed of service

In a queuing system, the speed with which service is provided can be expressed in either of two
ways – as service rate and as service time. The service rate describes the number of customers
serviced during a particular time period. The service time indicates the amount of time needed to
service a customer. Service rates and times are reciprocal of each other either of them is sufficient
to indicate capacity of the facilities. Thus, if a cashier can attend, on the average, to 10 customers
in an hour, the service rate would be expressed as 10 customers/hours and service time would be
equal to 6 minutes/customers. Generally, however, consider the service time only.

OPERATING CHARACTERISTICS OF QUEUING SYSTEM

An analysis of given queuing system involves a study of its different operating characteristics. This
is done queuing models. Some of the more commonly considered characteristics are discussed
below:
I. Queue length – The average number of customers in the queue waiting to get service.
Large queues may indicate poor service performance while small queues may imply too
much server capacity.
II. System length – The average number of customers in the system, those waiting to be
and those being serviced. Large values of this statistic imply congestion and possible
customer dissatisfaction and a optional need for greater service capacity.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 101

 III. Waiting time in the queue – The average time that a customer has to wait in the queue
to get service. Long waiting times are directly related to customer dissatisfaction and
potential loss of future revenues, while very small waiting times may indicates too much
service capacity.
IV. Total time in the system – The average time that a customer spends in the system, from
entry in the queue to completion of service. Large valves of this statistic are indicative of
the need to make adjustment in the capacity.
V. Server idle time – The relative frequency with service system is idle. Idle is directly
related to cost. However, reducing idle time may have adverse effects on the other
characteristics mentioned above.

Determination Queuing Model

Let us first consider the case where the customers arrive in the queuing system at regular intervals
and the service time for each customer is known and constant.
Suppose that customer come to a bank’s teller counter every 5 minutes. Thus the interval
between the arrival of any two successive customers is exactly 5 minutes. Suppose further that
the banker takes exactly 5 minutes to serve a customer. Here the arrival and the service rates are
each equal to 12 customers per hour. In this situation there shall never be a queue and the banker
shall always be busy with work.
The problem in such situation can be resolved by providing additional service station(s).
Symbolically, let the arrival rate be λ customers per unit time and the service rate is μ customers
per unit time.
Then,
If λ > μ the waiting line shall be formed which will increase indefinitely; the service facility
would always be busy; and the service system will eventually fail; and
if λ ≤ μ there shall be no waiting time; the proportion of time service facility would be idle
is 1 – λ/μ.
The ratio λ/μ = ρ is called the average utilisation, or the traffic intensity, or the clearing
ratio.

Probabilistic Queuing Models

Of the numerous queuing models available, we shall consider the following models:
1. Poisson-exponential, single server model-infinite population;
2. Poisson-exponential, single server model-finite population; and
3. Poisson-exponential, multiple server model-infinite population.
In each of these, the words ‘Poisson-exponential’ indicate that the customer arrivals follow Poisson
distribution while the service times are distributed exponentially. To recapitulate, if the arrivals
are independent, with the average arrival rate equal to λ per period of time, then. According to
the Poisson probability distribution, the probability that n customers will arrive in the system
during a given interval T, is given by the following:
n
P(n customers during T) = e- m m
n!
Where m = λT, and e = 2.7183

102 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 1
On an average, 5 customers reach a barber’s shop every hour. Determine the probability that
exactly 2 customers will in a 30 minutes period, assuming that the arrivals follow Poisson
distribution.

Problem: 2
The manager of a bank observes that, on the average, 18 customers are served by a cashier in
an hour. Assuming that the service time has an exponential distribution, what is the probability
that (a) a customer shall be free within 3 minutes, (b) a customer shall be services in more than
12 minutes?

A. Poisson-Exponential Single Server Model–Infinite Population

This model is based on the following assumptions:
1) The arrivals follow Poisson distribution, with a mean arrival rate of, say, λ.
2) The service time has exponential distribution. Let the average service rate be µ.
3) Arrivals are from infinite population.
4) The customers are served on a first-come-first-served basis.
5) There is only a single service station.

To evaluate the model, we begin with the first question whether the service station can handle
the customer demand for service. The answer to this question lies in the values of µ and λ. If λ ≥ µ,
the waiting line would increase without limit, leading to the breakdown of the system ultimately.
For a workable system, it is necessary that λ < µ. It is interesting to observe that even if λ = µ, then
system shall not work. This can be shown mathematically.
As pointed out earlier, the ratio ρ =λ/µ is defined as the traffic intensity. This indicates the
proportion of time, or the probability, that the service station is busy. From this, the probability
that the system is idle, that is, there are no customers in the system, equals P0 = 1 – ρ.
We can show that the probability of having exactly in the system is P1 = ρP0. Similarly, the
probability of having exactly 2 customers in the system would be P2 = ρP1 = ρP0.
To generalise, the probability of having exactly n customers in the system shall be:
Pn = ρnP0 = ρn(1 – ρ)

We can use this result to determine the expected number of customers in the system.
∞
Ls = ∑=
n 0
nPn

This can be solved to obtain

λ ρ
Ls = or
µ−λ 1− ρ

Expected number of customers in the queue shall be equal to the difference between the expected
number of customers in the system and the expected number of customers being served. Now,
since the server is busy, or is serving one unit, λ/µ of the time, and is serving 0 unit (i.e.., it is idle)
1 – λ/µ of the time, the expected number being served equals

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 103

  λ  λ λ
1  + 0 1 −  =
 µ  µ µ
Consequently, expected number of customers in the queue,
λ λ λ
Lq = L s × = ×
µ µ−λ µ
λ2 ρ2
= or
µ (µ − λ ) 1 − ρ
It is significant to note that Lq is the average length of all queue including empty queues. The
average length of non-empty queues, that is, those which contain at least one customer, Lq, is
given by the following expression.
1 µ
Lq’ = or
1− ρ µ − λ
With an average arrival rate of l, the average time between the arrival is 1/λ. Thus the mean
waiting time in queue, Wq, is the product of the average time between the arrivals and the
average queue length. Symbolically,

1
Wq = . Lq
λ
Substituting λ2/µ (µ - λ) for Lq and simplifying we get
λ ρ
Wq = =
µ(µ − λ ) µ − λ

Similarly, the mean time in the system, Ws, is equal to the product of the average time between
arrivals and the average number of customers in the system. Thus,

1
Wq = × Ls
λ
Putting Ls = λ/(µ - λ) in the equation and simplifying, we get
1
Ws =
µ−λ
Stated another way, since the mean service rate is µ, the average (expected) time for completing
the service is 1/µ. Therefore, the expected time a customer would spend in the system shall be
equal to the expected waiting time in the queue plus the average processing/servicing time. Thus,
1
Ws = Wq +
µ
λ 1 1
= + =
µ(µ − λ ) µ µ − λ

104 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 3
A tailor specialises in ladies’ dresses. The number of customers approaching the tailor appear to
be Poisson distributed with a mean of 6 customers per hour. The tailor attends the customers on a
first-come-first-served and the customers wait if the need be. The tailor can attend the customers
at an average rate of 10 customers per hour with the service time exponentially distributed.

Required,
I. Find the probability of the number of arrivals (0 through 5) during (i) a 15-minute
interval, and (ii) a 30-minute interval.
II. The utilisation parameter.
III. The probability that the queuing system is idle.
IV. The average time that the tailor is free on a 10-hour working day.
V. The probability associated with number of customers (0 through 5) in the queuing system.
VI. What is the expected number of customers in the tailor shop?
VII. What is the expected number of customers waiting for tailor’s services?
VIII. What is the average length of queues that have at least one customer?
IX. How much time should a customer expect to spend in the queue?
X. What is the expected time a customer would spend in the tailor’s shop?
XI. Assuming that n > 0 (i.e. customers are in the system) what is the probability that the
waiting time (excluding service time) of a customer in the queue shall be more than 10
minutes?
XII. Assuming that the customers are in the system, what is the probability that a customer
shall be in the shop for more than 15 minutes?

Problem: 4
Arrivals at a telephone both are considered to be Poisson, with an average time of 10 minutes
between one arrival and the next. The length of a phone call is assumed to be distributed
exponentially, with mean 3 minutes. Find:
(i) The probability that an arrival finds that four persons are waiting for their turn;
(ii) The average number of persons waiting and making telephone calls; and
(iii) The average length of the queue that is forms from time to time.
The average inter-arrival time being 10 minutes , the average arrival rate = 60/10 = 6 customers
per hour, similarly, average length of the phone call being 3 minutes, the average service rate =
60/3 = 20 customers per hour. With λ = 6 customers/ hour and µ = 20 customers/hour, we have
ρ = λ/µ = 6/20 = 0.3.

Problem: 5
The Taj Service Station has a central store where service mechanism arrive to take spare parts
for the jobs they work upon. The mechanics wait in queue if necessary and are served on a first-
come-first-served basis. The store is manned by one attendant who can attend 8 mechanics in an
hour on an average. The arrival rate of the mechanics averages 6 per hour. Assuming that pattern
of mechanics’ arrivals is Poisson distributed and the servicing time is exponentially distributed,
determine Ws, Wq and Llq where the symbols carry their usual meaning.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 105

Problem: 6
A repairman is to be hired by a company to repair machines that break down following a Poisson
process, with an average rate of four hour. The cost of non-productive machine time is Rs 90
per hour. The company has the option of choosing either a fast or a slow repairman. The fast
repairman charges Rs 70 per hour repair machines at an average rate of 7 per hour . while the
slow repairman changes Rs 50 per hour and will repair machines at an average rate of 6 per hour.
Which repairman should be hired?

B. Poisson-exponential, Single-server Model-Finite Population

This queuing model is based on similar assumption as the earlier discussed model except that
the input population is finite. For this model, the system structure is such that we have a total
of M customers; a customers is either in the system (consisting of a queue and a single service
station), or outside the system and, in a sense, arriving. In particular, when a customer is in the
arriving condition, then the time it takes him to arrive is a random variable having an exponential
distribution with mean = 1/l. As a result, when there are n customers in the system, then are
M – n customers in the arriving state and, therefore, the total average rate of arrivals in the
system is l(M - n). It may be observed that system is self regulating.
To illustrate, suppose that a factory has five machines which are required to be handled by the
maintenance staff for repairing and working. The number of customers (the machines here), or
the population, is finite, a small countable set. It has implication that the removal of one machine
from production can drastically change the probability of another machine being removed.
With M as the number of customers in the source population, 1/l as the average inter-arrival
time between successive arrivals, and µ as the service rate, we have
a. Probability that the system shall be idle,
−1
 M  M !   λi
P0 =  ∑    
 i = 0  ( M − i ) !  µ  

b. Probability that there shall be n customers in the system,

M!
Pn = P0 (λ/µ)n 0<n≤M
( M − n) !
= 0 n>M

λ+µ
c. Expected length of the queue, Lq = M - (1 – P0)
λ
d. Expected number of customer in the system,
Ls = Lq + (1 – P0)

µ
= M - (1 – P0)
λ
e. Expected waiting time of a customer in the queue,
Lq 1 M λ + µ
Wq = = −
µ (1 – P0 ) µ  (1 – P0 ) λ 

106 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 f. Expected time a customer spends in the system,

1
Ws = Wq +
µ

1 M λ+µ 
= − + 1
µ  (1 – P0 ) λ 
Problem: 7
Past records indicate that of five machines that a factory owns, breakdowns occur at random and
the average time between the breakdowns is 2 days. Assuming capacity of the workman is one
machine a day and the repairing time is distributed exponentially, determine the following:
a. The probability that the service facility will be idle,
b. The probability of various number of machine (0 through 5) to be, and being repaired,
c. The expected length of the queue,
d. The expected number of machine waiting to be, and being repaired,
e. The expected time that a machines shall wait in the queue to be repaired, and
f. The expected time a machine shall be idle for reason of waiting to be repaired and being
repaired.

C. Poisson-exponential, Multiple-server Model-Infinite Population

Each of the previous two models were based on the assumption that there is only service facility
in the system. Now we shall consider a model in which there are multiple service stations, which
are giving parallel, identical service. It covers situations where, for example, there may be more
than one doctor in a hospital whom the patients can visit; there may be more than one runway at
an airport for takeoff and landing,....and so on.
Assumptions The model is based on the following assumptions:
a. The arrival of customers follows Poisson probability law, the average arrival rate being l.
b. The service time has an exponential distribution.
c. There are k service, each of which provides identical service.
d. A single waiting line is formed.
e. The input population is infinite.
f. The service is on a first-come-first-served basis.
g. The arrival rate is smaller than the combined service rate of all k service facilities.

Operating Characteristics
We shall use the following expressions:
λ = average rate of arrivals
µ = mean service rate of each of the servers
K = number of servers
kµ = mean combined service rate of all the servers
λ
ρ= = utilisation factor of the entire system
κµ

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 107

The operating characteristics are given here:
a. Probability that the system shall be idle,
−1
 K −1 (λ / µ )i (λ / µ ) k 
P0 =  ∑ +
 i=0 i ! k !(1 − ρ) 
b. Probability that there shall exactly be n customers in the system,
(λ / µ )n
P n = (P0) , when n ≤ K
n!
(λ / µ )n
And P n = (P0) , when n > K
k !k n – k
c. The expected number of customers in the waiting line,
(λ / µ )k ρ
Lq = (P )
k !(1 − ρ) 2 0
d. The expected number of customers in the system,
λ
Ls = L q +
µ
e. The expected waiting time in the queue,
L
Wq = q
λ
f. The expected time a customer spends in the system,
1
Ws = Wq +
µ

Problem: 8
The Taj service station has five mechanics each of whom can service a scooter in 2 hours on an
average. The scooters are registered at a single counter and then sent for servicing to different
mechanics. Scooters arrive at the service station at an average rate 2 scooters per hour.
Assuming that the scooter arrivals are Poisson distributed and the servicing times are distributed
exponentially, determine,
1. Utilisation factor,
2. The probability that the system shall be idle,
3. The probability that there shall be 3 scooters in the service centre,
4. The probability that there shall be eight scooters in the centre,
5. The expected number of scooters waiting in the queue,
6. The expected number of scooters in the service centre,
7. The average waiting time in the queue, and
8. The average waiting time in the queue, and
9. The average time spent by a scooter in waiting and getting serviced.

Problem: 9
Customers arrive at the First Class ticket counter of a Theatre at a rate of 12 hour. There is one
clerk servicing the customers at a rate of 30 per hour.

108 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 (i) What is the probability that there is no customer in counter (i.e. that the system is idle)?
(ii) What is the probability that there are more than 2 customers in the counter?
(iii) What is the probability that there is no customers waiting to be served?
(iv) What is the probability that a customer is being served and nobody is waiting?

Problem: 10
A Tv repairman finds that the time spent on his job has an exponential distribution with mean 30
minutes. If he repairs sets in the order in which they come and if the arrival of sets is approximately
Poisson with an average rate of 10 per 8-hour day, what is his expected idle time each day? How
many jobs are head of the set just brought in?

Problem: 11
Assume that at a bank teller window the customers arrive in their cars at the average rate of
twenty per hour according to a Poisson distribution. Assume also that the banker teller spends an
distributed. Customers, who arrive from an infinite population, are served time is exponentially
basis, and there is no limit to possible queue length.
(i) What is the expected waiting time in the system per customer?
(ii) What is the mean number of customers waiting in the system?
(iii) What is the probability of zero customers in the system?
(iv) What value is the utilisation factor?

Problem: 12
The rate of arrival of customers at a public telephone follows Poisson distribution, with an average
time ten minutes between one customer and the next. The duration of phone call is assumed to
follow exponential distribution with a mean time of three minutes.
(i) what is the probability that a person arriving at the booth will have to wait?
(ii) What is the average length of the queue?
(iii) The Mahanagar Telephone Nigam Ltd. Will install another booth when it is convinced
that the customers would have to wait for at least three minutes for their turn to make
a call. How much should be the flow of customers in order to justify a second booth?

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 109

 SIMULATION

INTRODUCTION THEORY
Simulation is a numerical technique for conducting experiments that involve certain types of
mathematical and logical relations necessary to describe the behaviour of a complex real world
system over extended period of time. In other words, it is a quantitative technique that utilizes a
computerized mathematical model in order to represent actual decision making under conditions
of uncertainty for evaluating alternative courses of action based upon facts and assumptions.

Applications of Simulation
Simulation can be used for learning about the operating characteristics of a new airplane by
simulating flight conditions in a wind tunnel, on electronic or hydraulic analog models of
production processes or economic systems, or on mathematical models of such real life systems
as inventory control, production scheduling network analysis and so on. It can also be used for
planning military strategy, traffic control management games and role playing, medical diagnosis,
hospital emergency facilities, gambling and analysis, location analysis- for example, determining
optional location for plants and warehouses evaluation of industrial and commercial policies.

Methodology of Simulation
The process of simulation a system consists of following steps:
(i) Identify and clearly define the problem.
(ii) List the statement of objective of the problem.
(iii) Construct a simulation model.
(iv) Validate the model.
(v) Make experiments with model constructed.
(vi) Analysis the result of simulation activity.
(vii) Examine the results and select the best course of action.

Advantages of simulation
1. Simulation techniques allow experiments with model of the system rather than the actual
operating system. Sometimes, experimenting with the actual system itself could prove
to be too costly and, in many cases, too disruptive. For example, if you are comparing
two ways of providing food service in a hospital, the confusion that would result from
operating two different systems long enough to get valid observations might be too
great. Similarly, the operation of a large computer centre under a number of different
operating alternatives might be too expensive to feasible.
2. The non technical manager can comprehend simulation more easily than a complex
mathematical model. Simulation does not require simplification and assumptions
to the extent required in analytical solutions. A simulation model is easier to explain
to management personnel since it is a secretion of the behaviour of some system or
process.

110 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 3. Sometimes, there is not sufficient time to allow the actual system to operate extensively.
For example, if we were studying long term trends in world population. We simply
cannot wait for required number of years to see results. Simulation allows the manger
to incorporate time an analysis. In a computer simulation of business operation the
manager can compress the result of several years or the required period into few
minutes of running time.
4. Simulation allows a user to analyse large complex problems for which analytical results
are not available. For example, in an inventory problem if the distribution for demand
and lead time for an item follow a standard distribution, such as the Poison distribution,
then a mathematical or analytical solution can be found. However, when mathematically
convenient distributions are not applicable to the problem, an analytical of the problem
may be impossible. A simulation model is a useful solution procedure for such problems.

Monte Carlo Simulation

The Monte-carlo method is a simulation technique in which statistical distribution functions are
created by using a series of random numbers. This method is generally used to solve problems
which cannot be adequately represented by the mathematical models or where solution of the
model is not possible by analytical method.
Monte-Carlo simulation yields a solution which should be very close to the optical, but not
necessary the exact solution. However, it should be noted that this technique yields a solution
that converges to the optical or correct solution as the number of simulated trials leads to infinity.

The Steps Involved In Carrying Out Monte Carlo Simulation Are:

1. To select the measure of effectiveness of the problem, that is, what element is used to
measure success in improving the system modeled. This is the element one wants to
maximize. For example, the might be idle time of a service facility, or inventory shortage
per period etc.
2. Identify the variables which influence the measures of effectiveness significantly. For
example, the number of facilities in operation or the number of units in inventory and
so on.
3. Determine the proper cumulative probability distribution of each variable selected
under step.
4. Get a set of random numbers.
5. Consideration of each random number as a decimal value of the cumulative probability
distribution. With the decimal, enter the cumulative distribution plot from the vertical
axis. Project this point horizontally, until it intersects cumulative probability distribution
curve. Then project the point of intersection down into the vertical axis.
6. Record the value (or values if several variables are being simulative) generated in step
(v) into the formula derived from the chosen measure of effective. Solve and record the
value the value. This value is the measure of effectiveness foe simulated value.
7. Repeat steps (v) & (vi) until sample is large enough for the satisfaction of the decision
market.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 111

 PROBLEMS
Problem: 1
A bakery keeps stock of popular brand of bread. Previous experience indicates the daily demand
as given below:
Daily demand: 0 15 25 35 45 50
Probability: 0.01 0.15 0.20 0.50 0.12 0.02
Consider the following sequences of random numbers:
48, 78, 09, 51, 56, 77, 15, 14, 68, 09
Using above sequence simulate the demand for the next 10 days.
1. Find out the stock situation if owner of the bakery decided to makes 35 breads everyday.
2. Estimate the daily average demand for the bread on the basis of simulated data.

Problem: 2
The automobile company manufacture around 150 scooters. The daily production varies from
146 to 154 depending upon the availability of raw materials and other working conditions:

Production per day Probability

146 0.04
147 0.09
148 0.12
148 0.14
150 0.11
151 0.10
152 0.20
153 0.12
154 0.08

The finished scooters are transported in a specially arranged lorry accommodating 150 scooters.
Using following random numbers:
80, 81, 76, 75, 64, 43, 18, 26, 10, 12, 65, 68, 69, 61, 67
Simulate the process to find out:
a) What will be the average number of scooters waiting in the factory?
b) What will be the average number of empty space on the lorry?

Problem: 3
A company manufactured around 200 mopeds. Depending upon the availability of raw materials
and other condition, the daily production has been varying from 196 mopeds to 204 mopeds,
whose probability is as given below:

112 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 Production per day Day Probability
196 0.05
197 0.09
198 0.12
199 0.14
200 0.20
201 0.15
202 0.11
203 0.08
204 0.06

The finished mopeds are transported in a specially designed three- storyed lorry than can
accommodate only 200 mopeds using the following 15 random numbers 82, 89, 78, 24, 53, 61,
18, 45, 04, 23, 50, 77, 27, 54, 10 simulates the process to find out:
(i) What will be the average number of mopeds waiting in the factory?
(ii) What will be the average number of empty spaces on the lorry?

Problem: 4
Dr. STRONG is a dentist who schedules all her patients for 30 minutes appointments. Some of the
patients take more or less than 30 minutes depending on the type of dental work to be done. The
following summary shows the various categories of work, their probabilities and the time actually
needed to complete the work.

Category Time required Probability of category

Filling 45 minutes 0.40
Crown 60 minutes 0.15
Cleaning 15 minutes 0.15
Extraction 45 minutes 0.10
Check up 15 minutes 0.20

Simulate the dentist’s clinic for hours and determine the average waiting time for the patients
as well as the idleness of the doctor: assume that all the patients show up at the clinic at exactly
their scheduled arrival time starting at 8.00 a.m. Use the following random numbers for handling
the above problem:
40   82   11   34   25   66   17   79

Problem: 5
Ramu and Raju are worker workers on a station assembly line. The distribution of activity times
at their station is :
Time (in sec): 10 20 30 40 50 60 70 80
Time freq. For Ramu 4 6 10 20 40 11 5 4
Time freq. For Raju 4 5 6 7 10 8 6 4

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 113

Assuming Raju must wait until Ramu completes first item, (before starting work he will have to
wait to process any of the other eight times.)
Simulate operation of the line for 8 items using the random numbers:

Operation 1 Operation 2
14 61 36 97
01 82 76 41
96 00 55 56
44 03 25 34

Problem: 6
A doctor who has introduced an appointments system for daily consultations has derived the
following information regarding patient punctually:
Minutes early 3 6%
2 29%
1 41%
On time 12%
Minutes late 1 7%
2 5%
The doctor times his consultations over a period, and derives the following frequency
distribution:
Minutes 12 10%
13 15%
14 28%
15 34%
16 13%
The doctor would like to issue appointment at 15- minute interval and wishes to have an idea
of his idle time, the patient a waiting time, and whether he can complete his appointment on
schedule.
Simulate sixteen consultations and derive the required information.
Given the following series of random numbers:
17 14 50 40 83 13 94 08 49 98 79 51 43 74 92 24
09 21 40 12 46 91 09 05 95 44 52 79 91 53 15 16

Problem: 7
The management of ABC Company is considering the Q of marketing a new product. The fixed
cost required in the product is RS. 4,000.
Three factors are uncertain, viz, the selling, variable cost and the annual sales volume. The product
has a life of only one year. The management has the data on these three factors as under:

114 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 Selling price Probability Variable Cost Probability Sales Volume Probability
(Units)
3 0.2 1 0.3 2,000 0.3
4 0.5 2 0.6 3,000 0.3
5 0.3 3 0.1 5,000 0.4

Considering the following sequence of thirty random numbers:

81, 32, 60, 04, 46, 31, 67, 25, 24, 10, 40, 02, 39, 68, 08, 59, 66, 90,
12, 64, 79, 31, 86, 68, 82, 89, 25, 11, 98, 16.
Using the sequences (First 3 random number for the trial etc.) simulates the averages profit for
the above project on the basis of 10 trails.

Problem: 8
The occurrence of rain in a city on a day is dependent upon whether or not it rained on the
previous day. If it rained on the previous day, the rain distribution is given by:

Event Probability
No rain 0.50
1 cm. Rain 0.25
2 cm. Rain 0.15
3 cm. Rain 0.05
4 cm. Rain 0.03
5 cm. Rain 0.02

If it did not rain the previous day, the rain distribution is given by:

Event Probability
No rain 0.75
1 cm. Rain 0.15
2 cm. Rain 0.06
3 cm. Rain 0.04

Simulate the city’s whether for 10 days and determine by simulation the total days without as
well as the total rainfall during the period. Use the following random numbers:
67 63 39 55 29 78 70 06 78 76
for simulation. Assume that for the first day of the simulation it had not rained the day before.

Problem: 9
A bookstore wishes to carry “Ramayana” in stock. Demand is probabilistic and replenishment of
stock takes 2 days (i.e. if an order is placed on March 1, it will be delivered at the end of the day
on March 3). The probabilities of demand are given below:
Demand (daily) 0 1 2 3 4
Probability 0.05 0.10 0.30 0.45 0.10

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 115

 Each time an order is placed, the store incurs an ordering cost of 10 per order. The store also
incurs a carrying cost of 0.50 per book per day. The inventory carrying cost is calculated on the
basis of stock at the end of each day.
The manager of the bookstore wishes to compare tow options for his inventory decision.
A. Order 5 books when the inventory at the end of the day plus orders outstanding is less
than 8 books.
B. Order 8 books when the inventory at the end of the day plus orders outstanding is less
than 8.
Currently (beginning of 1st day) the store has a stock of 8 books plus 6 books ordered two days ago
and expected to arrive next day.
Using Monte Carlo Simulation for 10 cycles, recommend, which option the manager, should
choose.
The two digits random numbers are given below:
89, 34, 78, 63, 81, 39, 16, 13, 73

Problem: 10
A Company manufactures 30 items per day. The sale of these items depend upon demand, which
has the following distribution:

Sales (Units) Probability

27 0.10
28 0.15
29 0.20
30 0.25
31 0.15
32 0.05

The Production cost and sale price of each unit are 40 and 50 respectively. Any unsold product is
to be disposed off at a loss of 15 per unit. There is a penalty of 5 per unit if the demand is not met.
Using the following random numbers estimate total profit/loss for the company for the next 10
days:
10, 99, 65, 99, 95, 01, 79, 11, 16, 20
If the company decides to produce 29 items per day, what is the advantage of disadvantage to
the company?

116 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 UNIT 5

PRODUCTIVITY MANAGEMENT
AND TOTAL QUALITY
MANAGEMENT

The I.L.O. publication, “Higher Productivity in Manufacturing Industries” has defined productivity
as the ratio between output of wealth and the input of resources used in the process of production.
The European Productivity Agency (EPA) has defined productivity as follows:
“Productivity is an attitude of mind. It is a mentality of progress of the constant improvement
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
a condition, it is a continual effort to apply new techniques and methods, it is the faith in human
progress.”
The term productivity can be defined in two ways. In simple terms, productivity is defined as a
ratio between the output and input – between what is produced and what is required to produce
it. a continual effort to apply new techniques and methods, it ids the faith in human progress.”

Output obtained
Productivity =
Inputs consumed

In a broader sense, productivity is defined as a measure of how well resources are brought
together in organisations and utilized for accomplishing a set of results.

Performance achieved
Productivity =
Resources consumed

Effectiveness
=
Efficiency

Target achieved
Effectiveness =
Target achievable
Actual consumption   
Input efficiency =
Desired or Standard consumption

Need of a Standard Definition

The common use of the term productivity in productivity in different sciences – physical, economic,
and behavioural-alike has created a lot of confusion in order to be scientific. It would be better
and would solve several problems if it is made clear that productivity is a physical phenomenon
whereas efficiency is a monetary phenomenon. Keeping this criterion in mind, some concepts can
be defined as follows:
 Effectiveness   
Productivity =
Economy in consumption
Achieved target/Desired target   
=
Achieved consumption/Desired consumption
Achieved target ∙ Desired input target  
=
Desired target Achieved input consumption
Maximum effectiveness
Production efficiency =
Minimum cost
Achieved performance or target
Organizational effectiveness =
Desired performance or target
Organizational effectiveness
Organizational or a firm’s efficiency =
Cost effectiveness
Degree of targets achieved
=
Minimum cost of achieving it

Kinds of productivity
1. Partial productivity: This measures productivity of one factor or input, keeping other
factors or inputs constants or unchanged. Mathematically, this is a partial derivative
of the output with respect to one input, keeping the other inputs constant. As seen
in the case of the Cobb-Douglas production, which has two factors labour and capital,
labour and capital, labour productivity can be estimated by ∂Y/∂K ILI assuming capital
as constant and the capital productivity by ∂Y/∂K ILI assuming labour as constant.
These measure the change in output with respect to labour and capital, one at a time
respectively, keeping in other constant.

2. Total Productivity: here, productivity is calculated with respect to the total cost or the
total finances committed, instead of one input, as given below:
Value added
Productivity =
Total factor cost
Value of gross output
=
Total value of input
The total factor productivity (TFP) is a measure of the overall changes in production
efficiency.

Total Quality Managment

Total Quality Management (TQM) is an enhancement to the traditional way of doing business.
It is a proven technique to guarantee survival in world-class competition. Only by changing the
actions of management will the culture and actions of an entire organisation be transformed.
TQM is for the Most part common sense. Analyzing these words.

118 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Total – made up of the whole
Quality – Degree of Excellence a product or service provides
Management - Act, art or manner of handling, controlling, directing etc.

Elements of Total Quality Management

TQM require six basic concepts :

1. A committed and involved management to provide long-term top-to-bottom
organizational support.
2. An unwavering focus on the customer, both internally and externally.
3. Effective involvement and utilization of the entire work force.
4. Continuous improvement of the business and production process.
5. Treating suppliers as partners.
6. Establish performance measure for the processes

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 119

THE FIVE PRINCIPLES OF TQM

Principles of Total Quality Management

BENEFITS OF A TQM PROGRAM

120 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 TQM Program creates continuous improvement. This leads to reduction in errors and waste,
which in turn leads to customer satisfaction. The benefits of this to the company is in the form of
reduced costs and increased sales, which basically means increased profits.
Productivity implies development of an attitude of mind and a constant urge to find better,
cheaper, quicker,easier and safe ways of doing a job manufacturing an article and providing a
service.
Productivity is the quality or state of being productive. It is some relationship of outputs to
inputs. It is a concept that guides the management of a production system, and measures its
success. It is the quality that indicates how well labour, capital, materials and energy are utilized.
Productivity improvement is sought everywhere because it supports a higher standard of
living, helps control inflation, and contributes towards a stronger national economy.
Productivity is an indicator reflecting the changes in the performance of the enterprise and
having some sort of input-output comparisons relating to various activities of an organization.
It also facilitates the management to control and plan its future operations of the enterprise.
A productivity index is a device of expressing the ratio between outputs and the inputs of the
resources numerically.
The productivity is a measure of how much input is required to achieve a given output.
Symbolically:
O
P= where P = Productivity; O = Output, I = Input
I
The output may be measured in terms of the units of goods produced or the value of goods
and services produced. The input, on the other hand, can be referred to as the combination of
different factors, i.e., raw materials, machinery, worker’s time, power, efforts and imagination of
entrepreneur and the managers. A unit of input, therefore, can be expressed as one worker, or
one hour of labour time or one tonne of raw materials, or one kw of electricity and so on.

The importance of the concept of productivity can be viewed from the following points:
1. To beat the competition: It is an age of cut-throat competition. There may be other
commodities which can serve as the substitutes of the terms ‘product’ and can attract
the consumers’ purchasing power. The firm whose productivity is higher can only beat
the competition and can exist in the market for long.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 121

 2. Guide to Management: The productivity indices are very useful for the management
and can be used for different purposes. These indices can serve as a valuable guide
to the management for improving the performance of its enterprise. The productivity
measures can be used for the following purposes:
(a) Strategic: With the help of productivity indices, the efficiency of different firms
can be measured, analysed and compared. The necessary steps can be taken to
improve the productiveness of the firm taking in view the productiveness of the
other competitive firms.
(b) Tactical: Different units or the sectors of the firm can also be compared as regards
to their productivity and the productivity of the less productive units or sectors
can be improved.
(c) Planning: A firm uses different inputs in producing the goods. A comparison of
relative benefits accruing from the use of different inputs can be had and the most
beneficial input can be used in production. It helps the management to plan for
the future.
(d) Administration: Productivity indices indicate the progress of the firm over a
period of years. The productivity of different inputs, including labour, can be
measured individually. The individual productivity indices help the management
in bargaining with the labour leaders, trade unions and the Government in case of
labour disputes regarding welfare activities. Thus administration can be improved
with the help of productivity indices.

3. An Indicator of Progress: In economically backward countries, productivity movement

is basic aspect of progress. It implies the development of an attitude of mind and a
constant urge to better, cheaper, quicker and safer ways of doing a job, manufacturing a
product and providing a service. In an urge to improve the productivity, new inventions
take place. This productivity is an aspect of basic progress.
4. Maximum utilization of Scarce Resources: In order to provide the articles or commodities
to the consumers at the lowest possible cost, the productivity urges to utilise the
available resources to the maximum to the satisfaction of customers. The productivity
processes and techniques are designed to facilitate more efficient work involving less
fatigue to workers by improvements in the layout of the plant and work, better working
environment and simplification of works.
5. Key to National Prosperity: The productivity, in fact, has become the synonymous to
progress. Higher productivity is an index of more production with the same inputs at
lower cost. It enables industry to offer goods to the general public at cheaper rates
and results in expansion of markets. The working conditions and wages of workers will
improve and industrialists too will get larger profits. Thus higher productivity is the key
to national prosperity. The secrets of Japan and Western countries’ prosperity lie in
increased productivity.
6. Prosperity to Labour: The higher productivity is a boon to labour also. It brings improved
working conditions, better wages and salaries to workers, better labour welfare activities
to labourers. Thus their standard of living is improved.

122 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 7. Other Uses:
(i) Higher productivity increases the profits and reserve funds of the industry that can
be used for expansion and modernization.
(ii) It increases the goodwill of the firm due to cheaper goods to the public, well-off
staff and more profits and better financial position.
(iii) It improves the competitive strength of the company in export markets through
reduction in cost of production and quality products.

Measurement of Productivity
The productivity or the performance of various input and output factors can be measured in
many ways. These measures are mainly based on the following two criteria:
(i) Change in output per unit of input: indicates the change in the performance of
corresponding input during the given period, e.g., change in output per worker or per
man-hour will signify the change in performance of labour.
(ii) Change in input per unit of output: during the given period signifies the change in the
performance of the corresponding input factor, e.g., change in man-hour or workers’
per unit of output will also indicate the change in the performance of the labour input.

Some of the well-known indices of productivity are given below:

(A) Man-hour output: The most widely used index of productivity is to work out the output
per man-hour it can be put as –
Productivity = Units of output / Total man-hours
(B) Productivity Ratio: The rate of return on capital employed is a valuable and widely used
guide to many types of business decisions. This ratio of profit to capital employed is a
valuable means of measuring the performance of divisions, sections, plants, products
and other components of a business, and can be calculated as—
Productivity = Net Profit / Capital employed
(C) Use of Financial Ratios: There are many situations when time standards cannot be set
and therefore, it is very difficult in such cases to measure the productivity by a direct
method. In these cases, financial ratios can be used to measure the productivity by
using its sales turn-over. But ‘added value’ is a more useful approach for measuring
productivity. ‘Added value’ means output - inputs.
The most common financial ratio of productivity is—
Productivity = Added Value / Labour Costs
Productivity = Added Value / Conversion Costs
The first ratio gives the financial productivity of labour force and
the second ratio gives the financial productivity of all the resources of the company put
together.
(D) Other Useful Measures: There are many other useful productivity ratios to measure the
productivity of various input factors. These are:
(i) Manpower Productivity =Value of output of goods or services /No. of workers or
man hours used
(ii) Materials Productivity = Value of output of goods or services / Units (or cost) of
materials used
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 123
 (iii) Capital Productivity = Value of output of goods or services / Capital assets employed
(iv) Energy Productivity = Value of output of goods or services / Units (or cost) of
energy used
A combined measure of productivity can be taken as
Productivity = Value of output of goods or services /Values of (labour capital materials + others
inputs)
There may be other input factors such as insurance, taxes, advertising etc.

Tools of productivity or how to increase productivity:

The productivity of an enterprise can be improved by improving the performance of various
inputs and other factors affecting productivity. For this purpose, use of following tools can be
recommended.

1. Human Aspects: Under this, cooperation of workers is sought in the following ways:
(i) More workers’ participation in management or in decision making through joint
consultation.
(ii) Improving communication services.
(iii) Improving mutual trust and cooperation through improved job procedures, better
training of employees, more workers incentives by implementing various incentive
schemes, and labour welfare programmes.
(iv) Better planning of work, more effective management, more democracy in
administration, improved human relations and selection and training of personnel
at various levels of management are some human efforts from the side of
management in order to improve the productivity.

2. Supply of Inputs:
(i) Improvement in the nature and quality of raw materials and their supplies to the
work.
(ii) Proper provision of plant, equipment and their maintenance.
(iii) Introduction of more and more machines and equipment in place of physical work.
(iv) Full utilization of manpower and efficiency or capacity of plant and equipment
employed.

3. Technological Aspects:
Certain methodological and technological developments are also necessary to improve
the productivity of the concern.
These are;
(i) Work, time and motion studies to determine better ways and means of doing a
job.
(ii) Implementing various simplification, specialisation and standardisation
programmes.
(iii) Applying control techniques comprising production and planning control, cost
control and quality control techniques.

124 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 (iv) Improving layout of plants, shops and machine tools, and material handling and
internal transportation system.
(v) Improving inspection techniques so as to minimise the wastage and defective
work.

Factors affecting industrial productivity:

Productivity is defined to be some ratio between output and input. Thus all factors which affect
output and inputs will also affect the measure of productivity.
The following factors affect the productivity.
1. Technological Development: Technical factors including the degree of mechanisation,
technical know-how, raw materials, layout and the methods and techniques of work
determine the level of technological development in any industry. The principal factors
in technological development affecting productivity are:
(a) The Size of the Plant: The size of the plant and the capacity utilisation has direct
bearing on productivity. Production below or above the optimum level will be
uneconomical and will tend towards lower level of productivity.
(b) Research and Development: Investment in research and development may yield
better method of work and better design and quality of products.
(c) Plant and Job Layout: The arrangement of machines and positions in the plant
and the set-up of the work-bench of an individual worker will determine, how
economically and efficiently production will be carried out.
(d) Machine and Equipment Design: Whether the design of machinery and equipment
is modern and in keeping with the limitations and capacities of the workers will
also determine the production efficiency and level of productivity.
(e) Production Processes: Advanced production processes involving the use of
modern integrated and automatic machinery and semi-processed materials have
been known to help in raising levels of productivity.
(f) Power, Raw Materials etc. Improved quality of raw materials and increased use of
power have a favourable effect on productivity.
(g) Scientific Management Techniques: Scientific management techniques such
as better planning of work, simplification of methods, time and motion study,
emphasis for reduced wastage and spoilage have positive effects on productivity.

2. Individual Factors: Individual factors such as knowledge, skill and attitude also affect the
productivity of industry. Knowledge is acquired through training, education and interest
on the part of learner.
Skill is affected by aptitude (one’s capacity to learn a particular kind of work), personality
(emotional maturity, balance of mind etc.) as also by education, experience, training
etc. Increased knowledge, skill and aptitude certainly increased the productivity and a
person deficient in these personal attributes is less productive than an average man.
The attitude (willingness of employee to work for organisation) of employees towards
the work and the organisation affect their productivity to a great extent.

3. Organisation Factors: Organsiation factors include various steps taken by the organisation
towards maintaining better industrial relations such as delegation and decentralisation
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 125
 of authority, participative management (workers’ participation in management),
organisational efficiency, proper, personnel policies relating to selection, placement,
promotion, wage salary levels, incentives, merit rating, job evaluation, training and
provision for two-way communication, supervision, etc. These factors also influence
motivation.

4. Work Environment: The importance of proper work environment and physical conditions
on the job has been emphasised by industrial psychologists and human engineers.
Better work environment ensures the greatest ease at work through better ventilation
and light arrangement, improved safety devices, reduction in noise, introducing suitable
rest-pause etc.

5. Other factors: There are several other factors that affect productivity. These are:
(a) Natural Factors: Physical, geographical and climatic conditions influence the
productivity at large. Abundance of natural resources affects the productivity and
similarly climate affects the efficiency of workers to a great extent.
(b) Managerial Factors: The industrial productivity is influenced very much through
managerial ability and leadership. The managerial ability of utilising the available
resources to the maximum, organising capacity, foresightedness, decision-making
ability and entrepreneurship are certain factors that contribute to productivity.
(c) Government Policy: Government policies towards industry also contribute to
industrial productivity.Taxation policy, financial and administrative policy, tariff
policy and protection policy affect the productivity to a large extent.

Illustration 1.
In a particular plant there are 10 workers manufacturing a single product and the output per month
consisting of 25 days of that particular product is 200. How much is the monthly productivity?
Solution:
Monthly productivity per worker = 200 / 10 = 20 units

Illustration 2.
There are two industries A and B manufacturing hose couplings. The standard time per piece is
15 minutes. The output of two small scale industries is 30 and 20 respectively per shift of 8 hours.
Find the productivity of each per shift of 8 hours. What is the expected production of each per
week consisting of 6 days?
Solution:
Productivity = Actual production / Standard production
Standard production of hose couplings per shift = (8 × 60) / 15 = 32 pcs
Productivity of industry A = 30 /32 = 15 /16 = 93.75%
and productivity of industry B = 20 / 32 = 5 / 8 = 62.5%
Production per week of industry A = 30 × 6 = 180 nos.
Production per week of industry B = 20 × 6= 120 nos.

126 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Illustration 3.
The following data is available for a machine in a manufacturing unit:
Hours worked per day 8
Working days per month 25
Number of operators 1
Standard minutes per unit of production
Machine time 22
Operator time 8
Total time per unit 30
(i) If plant is operated at 75% efficiency, and the operator is working at 100% efficiency,
what is the output per month?
(ii) If machine productivity is increased by 10% over the existing level, what will be the
output per month?
Solution:
(i) Hours worked per day = 8
Working days per month = 25
Hours worked per month = 25 × 8 = 200 hrs.
Machine time = 22 minutes
operator time = 8 minutes
Total per unit = 30 minutes = ½ hr.
No. of units produced/month/operator = 200 / ½ hr = 400
As the no. of operator is 1, monthly production = 400 units.
As the plant operates at 75% efficiency.
Monthly production = 400 × 75% = 300

(ii) If machine productivity is increased by 10% i.e. Machine time = 22 × 100 /(100 +10) = 20
minutes. Then, total time = 20 + 8 = 28 minutes
Monthly production = (400 x 30 x 75 %) / 28 = 321

Illustration 4.
The following data is available for a manufacturing unit :
No. of operators : 15
Daily working hours : 8
No. of days per month : 25
Std. production per month : 300 units
Std. Labour hours per unit : 8
The following information was obtained for November 2015:
Man days lost due to absenteeism : 30
Unit produced : 240
Idle Time : 276 man hours

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 127

Find the following:-
(a) Percent absenteeism
(b) Efficiency of utilisation of labour
(c) Productive efficiency of labour
(d) Overall productivity of labour in terms of units produced per man per month.
Solution:
No. of days per month = 25
Daily working hrs. = 8
No. of operators = 15
No. of Man days = 15 × 25 = 375 Man days.
Total working hrs. = 375 × 8 = 3,000
Hours lost in absenteeism = 30 × 8 = 240
(i) Percent absentees = 240 hrs./3000 hrs = 8%
(ii) Efficiency of utilisation of labour
Standard labour hour to produce 240 units
Total labour hour = 240 x 8 =1920 hr
Efficiency of utilization of labour = 1920/3000 = 0.64 ie 64%
(iii) Standard time required to produce 240units = 240 ×8 = 1920 labour-hours.
In November, man hours lost = 30 × 8 = 240
idle time = 276
Total loss of time = 516 hours.
Productive hours available in November = 3000
Less, Total loss of time = 516
Actual labour-hours = 2484 hours
Efficiency of labour = 1920/ 2484 = 0.773 ie 77.3%
(iv) 15 men produces 300 units,
Std. labour productivity = 300/15 = 20 units.
In November, overall productivity = 240/15 = 16 units.
i.e. productivity falls by 25%.

Illustration 5.
An incentive scheme allows proportionate production bonus beyond 100% performance level.
Calculate the amount of
(i) Incentive bonus and
(ii) Total payment received by an operator on a particular day during which the following
particulars apply:
Operation : Assembling pocket transistor radio set
Work Content : 30 Standard minutes per assembled set
Attended Time : 8 Hours
Time spent on unmeasured work : 2 Hours

128 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 Numbers of sets assembled during the day : 15
Wage rate : `4 per hour
(iii) What is the net labour productivity achieved by the operator during the day?
Solution:
Total standard minutes worked during the day = 30 × 15 = 450, working time = 8 – 2 = 6 hours =
360 minutes.
Performance = (450 × 100) /360 = 125%
(i) Incentive bonus = 0.25 × 6 × 4 = ` 6 for six hours on measured work
(ii) Guaranteed wage for 8 hours = 8 × 4 = `32;
Total earnings for the days = ` (6 + 32) = `38
(iii) Net labour productivity = Output in units / Net man hours
= 15 / 6 = 2.5 sets per hour.

What is Total Quality Management (TQM)?

A philosophy that involves everyone in an organisation in a continous effort to improve quality
and achieve customer satisfaction.

Basic Concepts in TQM

1. Top management commitment and support.
2. Focus on both internal and external customers.
3. Employee involvement and empowerment.
4. Continuous improvement (KAIZEN)
5. Partnership with suppliers
6. Establishing performance measures for processes.

Essentials of TQM Focus

1. Customer satisfaction
2. Leadership
3. Quality policy
4. Organisation structure
5. Employee involvement
6. Quality costs
7. Supplier selection and development
8. Recognition and reward.

Underlying Principles in TQM

1. Strive for quality in all things (Total Quality)
2. The customer is the creation of quality
3. Improve the process or systems by which products are produced

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 129

 4. Quality improvement is continuous, never ending activity (continuous improvement-
Kaizen)
5. Worker involvement is essential
6. Ground decisions and actions on knowledge
7. Encourage team work and cooperation.

Scope of TQM
1. Are integrated organisational infrastructure
2. A set of management practices
3. A wide variety of tools and techniques.

QM is Japanese approach to quality. The term TQM refers to a quest-for quality in an

organization. TQM is a process that underlines three philosophies.
One is never-ending push to improve, which is referred to as continuous improvement; the
second is the involvement of every employee in the organization and the third is the goal for
customer satisfaction, which means meeting or exceeding customer expectations.
It often focuses on benchmarking world-class standards, product and service design and
purchasing. In addition, TQM involves a number of other elements such as:
• Team approach,
• Employee empowerment
• Decisions based on facts rather than opinions,
• Knowledge of quality tools [flow charts, check sheets, histograms, pareto analysis,
scatter diagrams etc.
• Quality at the source and
• Inclusive of supplies as a part of quality improvement programme.

TQM is a process of continuous improvement at every level of the organization-the centre of

the entire process is customer satisfaction.
TQM implies that the organization is doing everything it can to achieve quality at all stages of
the process, from customer demands, to product design, to engineering.
TQM seeks to breakdown communication barriers among employees and also between the
organization and its external stakeholders, in order to increase cross-functional integration and
provide new avenues for co-operation to improve quality.
TQM organization strives to develop co-operative relationships with its suppliers and
distributors so that continuous improvement of quality becomes their goals too.
Ford, Motorola, and GM have taken steps to develop long-term relationships with their
suppliers and distributors.

Quality Certification
Many international businesses recognize the importance of quality certification. The EU, in 1987,
established ISO [International Organization for Standardization] 9000 certification.
Two of the most well known of these are ISO 9000 and ISO 14,000.

130 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 ISO 9000 pertains to quality management. It concerns what an organization does to ensure
that its products or services are suitable to customers expectations.
ISO 14,000 concerns minimization of harmful effects to the environment caused by its
operations.
Both ISO 9000 and ISO 14000 are related to an organization processes rather than its products
and services and they stress continual improvement.
ISO 9000 is composed of the national standard bodies of 91 countries. About 90 countries
have adopted ISO 9000 as national standards.
This certification is intended to promote the idea of quality at every level in the organisation.
ISO certification is an elaborate and expensive process. Any firm seeking this certification
needs to document how its workers perform every function that affects quality and install
mechanisms to ensure that, they follow on expected lines.
ISO 9000 certification entails a complex analysis of management systems and procedures.
Rather than judging the quality of a particular product,
ISO 9000 evaluates the management of the entire manufacturing process, from purchasing,
to design, to training. A firm that seeks this certification must fill out a report and thenbe certified
by a team of independent auditors.
With certification comes registration in an ISO directory, that firms seeking suppliers can
refer to, for a list of certified companies. They are generally given preference over unregistered
companies.
There are essentially five standards associated with the ISO 9000 series. The series, if we
place them on a continuum, would range from design and development through procurement,
production, installation and servicing. Whereas, ISO 900X3 and 9004 only establish guidelines for
operation, ISO 9001, 9002 and 9003 are well-defined standards.

Quality System
9001 Model for Quality Assurance in Design, Production, Installation and Servicing. (To be used
when conformance to specified requirements is to be assured by the supplier during several
stages that may include design/ development, production, installation and servicing).
9002 Model for Quality Assurance in Production and Installation. (To be used when conformance
to specified requirements is to be assured by the supplier during production and installation).
9003 Model for Quality Assurance in Final Inspection Test. (To be used when conformance to
specified requirements is to be assured by the supplier solely at final inspection and test).

Guidelines for Use

9000 Quality Management and Quality Assurance Standards - Guidelines for Selection and Use.
9004 Quality Management and Quality System Elements - Guidelines.
ISO 9000 Standards, their Areas of Application in Production Flow and Guidelines for Use

Design/ Development Procurement Production Installation Servicing

ISO 9001
ISO 9002
ISO 9003

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 131

ISO certification is a must for doing business with any member of the EU. In addition to the
benefits of accessing the EU, ISO 9000 certification and registration is particularly helpful for
companies that do not currently have a quality management system, as it provides guidelines
for establishing the system and making it effective. The latest version of ISO 9000 2000 forms the
basis of eight quality management principles.

1. A system approach to management

2. Continual improvement
3. Actual approach to decision making
4. Mutually beneficial supplier relationships
5. Customer focus
6. Leadership
7. People involvement
8. Process approach.

Illustration 1.
Compute the productivity per machine hour with the following data. Also draw your interpretation.

Month No. of machines employed Working hours Production Units

January 400 220 99,000
February 550 180 1,00,000
March 580 220 1,25,000

Answer:

Month No. of mach. Working hrs Machine hrs Production

Employed Units
January 400 220 88,000 99,000
February 550 180 99,000 1,00,000
March 580 220 1,27,600 1,25,000

P = Productivity per machine hour = Number of units produced /Machine hours

For January P = 99,000/88,000 = 1.125
February P = 100,000 / 99,000 = 1.010
March P = 125,000 /127,600 = 0.980
Interpretation: Though the total production in number of units is increasing, the productivity is
declining.

Illustration 2.
Calculate the standard production per shift of 8 hours duration, with the following data: Observed
time per unit = 5 minutes, Rating Factor -120%, Total allowances = 30% of normal time.

132 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Answer:
Normal time per unit = Observed time / unit × Rating factor = 5 × (120/100) = 6minutes
Allowances = 30% of normal time = (30 × 6)/100 = 1.8 minutes
Standard time/unit = Normal time/unit + Allowances = 6 + 1.8 = 7.8 minutes / unit
Standard production in shift of 8 hours = (8×60)/7.8 = 61.54 units.

Illustration 3.
Compute the productivity per machine hour with the following data. Also draw your interpretation.

Month No. of machines Working hours Production Units

employed
July 400 225 99,000
August 500 200 1,00,000
September 600 250 1,35,000

Answer:

Month No. of machines Working hrs Machine hrs Production

employed Units
July 400 225 90,000 99,000
August 500 200 1,00,000 1,00,000
September 600 250 1,50,000 1,35,000

We know, P = Productivity per machine hour, = Number of units produced / Machine hours
For March P = 99,000/90,000 = 1.1
April P = 100,000/100,000 =1
May P = 135,000 /l 50,000 = 0.9
Interpretation: Though the total production in number of units is increasing, the productivity is
declining.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 133

 UNIT 6

PROJECT MANAGEMENT

Introduction Theory:-
Now a days, there is more complexity in management problems and Business competition, which
is a major challenge for the management decision makers. In the large and complex projects
involving a number of interrelated activities, requiring a number of men, machine and materials,
it is not possible for the management are thus always looking for some methods and technique
which may help in planning, scheduling and controlling the project.
A project is defined as a set of activities or jobs that are performed in a certain sequence
determined logically or technologically and it has to be completed within a specified time specified
cost and meeting the performance standards.
Network Analysis – PERT and CPM. Network analysis is one of the most popular techniques used
for planning, scheduling, monitoring and coordinating large and complex projects comprising a
number of activities. It involves the development of a network to indicate logical sequence of
work content elements of a complex situation. It involves three basic steps:
(a) Define the job to be done
(b) Integrating the elements of the job in a logical time sequence
(c) Controlling the progress of the project.

Objectives:- Network analysis can be used to serve the following objectives:

(a) Minimisation of total time:- Network analysis is useful in completing a project in
the minimum possible time. A good example of this objective is the maintenance
of production line machinery in a factory. If the cost of downtime is very high, it is
economically desirable to minimize time despite high resource costs.
(b) Minimisation of total cost:- Where the cost of delay in the completion of a project exceeds
cost of extra effort, it is desirable to complete the project in time so as to minimize total
cost.
(c) Minimisation of time for a given cost:- When a fixed sum is available to cover costs, it
may be preferable to arrange the existing resources so as to reduce the total time for the
project instead of reducing total cost.
(d) Minimisation of cost for a given total time:- When no particular benefit will be gained
from completing the project early, it may be desirable to arrange resources in such a
way as to give the minimum cost for the project in the set time.
(e) Minimisation of idle resources:- The schedule should be devised to minimize large
fluctuations in the use of limited resources. The cost of having men/machines idle
should be compared with the cost of hiring resources o a temporary basis.

A project is an endeavour to create a unique product or service. Projects are part of an overall
programme and are broken down into well defined set of tasks, subtask and further if desired, all
of which must be competed in the specific time along with minimum cost. Hence, before starting
any project, it is necessary to prepare a plane for scheduling and controlling the various tasks
(activities) involved in the given project.
To meet the object of systematic planning, the management have evolved a number of
techniques applying network strategy. PERT (Programme Evaluation and Review Technique) and
CPM (Critical Path) are two further important and widely used network technique for planning,
scheduling and controlling the large and complex projects.

GENERAL FRAMEWORK OF PERT/CPM

A project can be defined as a set of activities or jobs that are performed in a certain sequence
determined logically or technologically and it has to be completed within (i) specified time, (ii) a
specified cost and (iii) meeting the performance standards. Examples a project from fairly diverse
fields can be cited as follows:
1. Introduction a new product in market.
2. Construction of a new bridge over a river of construction of a 25 storied building.
3. Executing a large and complex order on jobbing production.
4. Sending a space craft to Mars.

All these products are characterised by the following set of common implication though they
pertain to widely different fields:
1. The large scale characteristics: These projects are unusually large complex. Thousands
of suppliers, workers and other categories of persons are involved their efforts have to
be coordinated for completion of the project.
2. The non recurring characteristics: These projects are generally of a one time nature.
Neither in past, nor in future they are likely to be undertaken substantially in the same
form.
3. Uncertainty of critical dates: Critical dates in various activities involved in such project
are usually uncertain. Further, in such type of projects many critical dates exist by which
operation must be completed in order to complete the entire project on schedule.
4. Completion dead line: The fourth distinct feature of these projects is that there is
deadline for the completion of the entire project. In case of any delay in the completion
of the project, some penalty is levied for such delay beyond the dead line.

The working methodology of critical path analysis (CPA) which includes both CPM and PERT
consists of following five steps:
1. Analyse and break the project down in terms of specific activities and /or events.
2. Determine the interdependence and sequence of specific activities and prepare a
network.
3. Assign estimates of time, cost or both to all the activities of the network.
4. Identify the longest or critical path through the network.
5. Monitor, evaluate and control the progress of the project by replanning rescheduling
and reassignment of resources.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 135

BASIC STEPS IN PERT/CPM TECHNIQUES
project scheduling by PERT/CPM consist of three steps:
(i) Palnning
(ii) Scheduling
(iii) Controlling
(i) Planning: The planning phase comprises of
• Setting the objective of the project and the assumption to be made.
• Development of work breakdown structure (W.B.S)
• Determine requirement of resources such as men, material, machines, money etc.
for carrying out activities.
• Assignment responsibility for each work package.
• Allocate resources to work packages.
• Estimate the activity duration and costs.
• Establish the interdependence relationships between the activities.
(ii) Scheduling: The scheduling phase comprises of laying the activities to the procedure
order and determining:
 The expected duration of each activity.
 Critical path on which the activities require special attention.
 Slack and float for non – technical paths.
(iii) Controlling: The final phase in project management is controlling, it involves,
 Making periodic progress report management is controlling, it involves.
 Analysis the status of the project.
 Update the network continuously.

Work Breakdown Structure (WBS)

A project is a combination of interrelated activities which must be performed in a certain order
for its completion. The process of dividing the 4 project into these activities is called the work
break down structure ( W. B. S).
For example, a group of students is given the project of designing, fabricating and testing a
small electric motor. The project can be broken down into the following subparts.
a. Design b. fabrication c. testing

Design Fabrication Testing

Network and its Components

A network is a graphic representation of a project’s operations and is composed and events that
must be completed to reach the end objective of a project, showing the planning sequence of
their accomplishments, their dependence and inter relationships.

136 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 The two major components of PERT/CPM network are as follow:
(i) Events: Events in the network diagram represent project milestones. It represent a point
in time satisfying the completion of some activities and the beginning of new ones.
This is generally represented by a circle ‘O’ in a network which is also called a node or
connector. It does not consume time.
The events can be further classified into following two categories:
(a) Merge Event: when more than one activity comes and joins an event. Such is
known as merge events.

(b) Burst event: when more than one activity leaves an event, such event is known as
a burst event.

(ii) Activity: Any individual operation, which utilizes resources and has an end and a
beginning is called Activity. An activity is represented on the network by an arrow with
its head indicating the sequence in which the vent are to occur.

The activities can be further classified into the following three categories:
A. Predecessor Activity: Activities that must be completed immediately prior to the start
of another activity are called predecessor activity.
B. Successor Activity: Activity which started immediately after one or more of other
activities are completed is known as successor activity.

POINTS TO REMEMBER
Rules of Network Construction: In network diagram, * An event cannot occur twice.
Arrows represent activities and circles the events. * Time flows from left to right.
There are some rules which have to be followed * Arrows should be kept straight an
While constructing a network. Those rules are as not curved or bent.
follows” * Angles between the arrows should
• Each activity is represented by one and only one be a slarge3 as possible.
• No two activities can be identifies by the same * Dummy activities should only be
End events. introduced it absolutely necessary.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 137

• No event can occur until every activity preceding * Arrows should not cross each other.
it has been completed. * The network has only one entry point
(start event) and one point of emergence
(end point).
Dummy activity: An activity which does not consume any kind of resource but merely depicts the
technological dependence is called a dummy activities. Dummy is generally shown by a chain of
dotted arrows.

Numbering the event: After the network is done in a logical sequence, every is assigned a number.
The number sequence should be such to reflect the flow of network. It involves steps:
1. Events number should be unique.
2. Event numbering should be carried out on a sequential basis from left to right.
3. The intial event which has all outgoing arrows with no incoming arrow is numbered as
unity (1).
4. Number all new starts event ‘2’, ‘3’ and so on.
5. The head of an arrow should always bear a number higher than the one assigned at the
tail of the arrow.
6. Delete all arrows emerging from all numbered events.
7. Continue until the final or terminal node which has all arrows coming in with no arrow
going out is numbered.

CRITICAL PATH
The critical path is the sequences of critical activities in a network. It is critical in the sense that if
any activity in this sequences is delayed, the completion of entire project will be delayed.
The critical path is denoted by double or darker lines in the network diagram.
By the term ‘Path’ we mean a sequence of activities such that if begins at the starting event
and end at the final event. The length of the critical path is the sum of the individual times of all
the activities lying on the path.

CRITICAL PATH METHOD (CPM):-

Critical path method was developed by M.R. Walker of E.T. du Pont de Nemours & Co. of USA
in1956. It is used for optimizing resource allocation and minimizing overall cost for a given project,
CPM was developed to help scheduling of routine plant overhaul and maintenance, building or a
pilot model plant, etc. CPM uses two time and cost estimates for each activity (one for the normal

138 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

situation and other for the crash situation). It is based on the assumption that the time which
each activity in the project will take is precise and unknown. The relation between the amount of
resources employed and the time needed to complete the project is also assumed to be known.
Consider the following nations for the purpose of calculating various times of events and activities.
Ei = earliest occurrence time of event, i. it is the earliest time at which an event can occur
without affecting the total project time.
Li = latest occurrence time of event, i. it is the latest time at which an event can occur
without, affecting the total project time.
ESij = earliest start time for activity (i, j). it is the time at which the activity can start without
affecting the total project time.
LSij = latest start time for activity (i, j). It is the latest possible time by which an activity must
start without affecting the total project time.
EFij = earliest finish time for activity (i, j). It is the earliest possible time at which an activity can
finish without affecting the total project time.
LFij = latest finish time for activity (i, j).It is the latest time by which an activity
must get completed without delaying the project completion.
tij = duration of activity (i, j).
It may be noted that: EFij = ESij + tij and LSij = LFij - tij.

Float vs. Slack

Float Slack
• Activity oriented • Event based
• Helps identify critical and non–critical • Helps identify critical and non–critical
activities events
• While scheduling resources in – • While time–cost trade–off is done, least
dependent and free floats play a slack of events is considered and the
dominant role where the activities activity of that event is chosen to crash
can be delayed without affecting total down.
project time.

(i) Total Float:- The total float of an activity represents the amount of time by which an
activity can be delayed without delay in the project completion date. In other work’s,
it refers to the amount of the free time associated with an activity which can be used
before during or after the performance of this activity. Total float is the positive difference
between the earliest finish time and the latest finish time of the positive difference
between the earliest start time and the latest start time of an activity depending upon
which way it is defined.
(ii) Interfering Float:- Utilization of the float of an activity may affect the float times of
the other activities in the network. Interfering float is that part of the total float which
causes a reduction in the float of the successor activities. It is the difference between the
latest finish time of the activity in question and the earliest starting time of the following
activity or zero, which ever is larger. It indicates that portion of the float of an activity
which cannot be consumed without affecting adversely the float of the subsequent
activities.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 139

 (iii) Free Float:- Free float is that portion of the total float within which an activity can be
manipulated without affecting the float of subsequent activities. It is computed for an
activity by subtracting the head event slack from its total float. The head event slack is
the difference between the latest and earliest event timings of an activity.
(iv) Independent Float:- It is that portion of the total float within which an activity can be
delayed for start without affecting floats of the preceding activities. It is computed by
subtracting the tail event slack from the free float of the activity. If the result is negative,
it is taken as zero.

Feature of Critical Path

Following are the main feature of critical path:
1. If the project has to be shortened, then some of the activities on the path must also be
shortened.
2. The variation in actual performance from the expected activities duration time will be
completely reflected in one-to-one fashion in the anticipated of the whole project

PROGRAMME EVALUATION AND REVIEW TECHNIQUE (PERT)

PERT was developed in 1958 by a navy-sponsored research team in USA, it was initially developed
for use in defence projects like Polaris fleet ballistic missile programme. But now it has become
a very popular management technique for planning and controlling projects. Under PERT the
completion time is assumed to be uncertain and unknown. Therefore, the probability of activity
completion time is estimated. Three time estimates are made for each activity – optimistic time
pessimistic time and normal time. Optimistic time is the best time that could be expected if
everything went exceptionally well. Pessimistic time is the worst time that could be expected if
everything went wrong.

Methodology of PERT. The steps involved in PERT are:-

(a) Preparation of the network:- First of all a list of activities that constitute the project is
prepared. The predecessor and successor activities are determined. A network diagram
is prepared on the basis of dependence between different activities and events. This is
project planning phase of PERT. Events are numbered in ascending order from left to
right.
(b) Network analysis:- Estimates of the time required to perform each activity are made
these estimates are based upon manpower and equipment availability. At this stage the
probability of completing the project or a part of it by a specified time can be computed.
(c) Scheduling:- Expected time for each activity is computed from the three time estimates.
Earliest and latest start time and finish time for each activity are determined. Then the
critical path through the network is determined. The slack time associated with the non-
critical activities is also computed.
(d) Time cost trade-offs:- If management wants to reduce the project completion time
crashing or compressing of the project is done. The cost of reducing the project comp
(e) Resource allocation:- The feasibility of each schedule is checked with respect to
manpower and equipment requirements. Replanning and re-scheduling may be
necessary if the resources are limited.

140 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 (f) Project control:- Once the network plan and schedule are developed to satisfactory
level. They are finalized. The project is controlled by checking progress against the
schedule, assigning and scheduling manpower and equipment and analyzing the effects
of delay. Whenever major changes are made in the schedule, the network is revised
accordingly and a new schedule is prepared. Thus, monitoring of progress may require
periodic updating of the project and re-scheduling to ensure completion of the project
in time.

Three Time Estimates for PERT. If the activity durations in a project are uncertain then activity
scheduling calculations are done by using the expected values of the durations. Sometimes, such
expected duration estimations may not give an accurate answer. Thus, rather than estimation
directly the expected completion time of an activity, three values are considered. From these
times a single value is estimated for future consideration. This is called three time estimates in
PERT. The three time estimates are as under.

(i) Optimistic time (t0 or a):- This is the shortest possible time to perform the activity,
assuming that everything goes well.
(ii) Pessimistic time (tp or b):- This is the maximum time that is required to perform the
activity, under extremely bad conditions. However, such conditions do not include acts
of nature like earth quakes, floods, etc.
(iii) Most likely time (tm or m):- this is the most often occurring duration of the activity.
Statistically, it is the modal value of duration of the activity.

These activity durations are bound to follow a probability distribution called Beeta(b) distribution.

Using the values of to, tp and tm the expected times of various activities and their standard
deviations are calculated as follows. The three time estimates are reduced into a single expected
time (te) with the weighted average formula:
te or m = 1/6(to + 4tm + tp)

Further to determine activity duration variance in PERT, we find an interval of variate values
of six standard deviations to contain the large majority of the distribution. Hence in PERT the
standard deviation is expressed as the one sixth of the range assumed by the variate, i.e.,

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 141

 Standard deviation, s = 1/6(tp – t0) or variance, σ2 = {1/6(tp – t0)}2
Estimate of Probability:- As we are expecting a variability in the activity duration, the total project
may not be completed exactly in time. Thus, it is necessary to calculate the probability of factually
meeting the scheduled time of the project as well as activities. The probability distribution of
times for completing an event can be approximated by the normal distribution due to central
limit theorem. Thus the probability of completing the project by scheduled time (Ts) is given by:

 T − µ
Prob  Z ≤ s e 
 σ 

Advantages of Pert/Cpm
1. The PERT/CPM technique help the management is properly planning the complicated
projects, controlling the working plan.
2. This technique help the management in reaching the goal with minimum time and least
cost.
3. The flexibility of the network permits the management to make the necessary alternative
and improvements as and when they are needed.
4. The network clearly designate the responsibilities of different supervisors.
5. Application of the network technique has resulted in better managerial control,
improved utilization of resources, improved communication and progress and better
decision making.

DISTINCTION BETWEEN PERT AND CPM

Both PERT and CPM are managerial technique for planning and control of large complex projects.
Both are technique network analysis wherein a network is prepared to analysis interrelationships
between activities of a project. However, there are several differences between the two techniques
mentioned on the following page.
1. CPM is used for repetitive jobs like planning the construction the house. On the other
hand, PERT is used for non repetitive jobs like planning the assembly of the space
platform.
2. Pert is a possibility of model with uncertainty in activity duration. Multiple time estimates
are made to calculate the probability of completing the project within schedule time. On
the contrary, CPM is a deterministic model with well known activity (single) times based
upon past experience. It. Therefore, does not deal with uncertainty in project duration.
3. PERT is said to be event oriented as the results of analysis are expressed in the terms
of event or distance points in time indicative of progress. CPM is, on the other hand,
activity oriented as the results of calculation are considered in terms of activities or
operations of the project.
4. PERT is applied mainly for planning and scheduling research programmes. On the other
hand, CPM is employed in construction and business problems.
5. PERT incorporates statistical analysis and thereby, enables the determination of
probabilities concerning the time by which each activity and the entire project would
be completed. On the other hand, CPM does not incorporate statistical analysisin
determining time estimates because time is precise and known.

142 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 6. PERT serves a useful control device as it assist the management in controlling a project
by calling attention through constant review to such delays in activities which might lead
to a delay in the project completion date. But it is difficult to use cpm as a controlling
device for the simple reason that one must repeat the entire evaluation of the project
each time the changes are introduced into the network.

Resource Levelling
A resource is defined by the physical variables such as crew size (labour), finance (cost) equipment
(shop facilities), etc. Available to the management to achieve the objective of a project.
The step in the resource allocation procedure is to determine the earlist start time (ES) and
the latest start time (LS) for each of the activities of the project.
The resources are allocated by stepping through time, scheduling the various activities as
soon as their respective predecessors are schedules and the resources required for them are
available. Two sets of activities are defined the first comprises activities eligible for assignment as
their predecessors have been schedule ( this may be termed as the eligible activities set (EAS)).
From the EAS, activities are selected, which can start on the particular time when resources are
to be allocated are ordered in accordance with usual criterion. These activities constitute the
ordered activities set (OAS).
In the general, there are following criteria by which scheduling can be finished vis- a – vis
resources deployment:
• Resource Leveling: in the process of Resource Leveling, the activities are critically
sequenced subject to the constraint of availability of resources; and also the minimum
period of the project is redetermined accordingly.
under this technique, the project manager may be able to lower the maximum resource
requirements by shifting a non critical activities between its earliest start time and latest
finish time.
The two general rules normally used in scheduling non critical activities are as under:
(i) If the total float of a non critical activity is equal to its free float, then it can be
schedule anywhere between its earliest start and lowest completion time.
(ii) If the total of non – critical activity is more than its free float then its staring time
can be delayed relative to its earliest start time by no more than the amount of its
free float, then its staring time can be delayed relative to this earliest start time
by no more the amount of its free float without affecting the scheduling of this
immediately succeeding activities.
• Resource Smoothing: Resource smoothing means maintaining the total project duration
at the minimum level by shifting resources from the activities having floats so that a
uniform demand on resources is achieved. In other words, resources smoothing involves
rescheduling of the activities of a project in such a way as to utilise the resources in a
fairly uniform manner and achieving a minimum project duration time.
The procedure of carrying out resource smoothing can be summarised in the following steps:
1. Calculate the earliest start and latest finish times of each activity and then draw a time
scaled version (or squared) of the network. Critical path in the network is drawn along a
straight line and non-critical activities on both side of this line, resource requirement of
each activity are given along the arrows.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 143

 2. Draw the resource histogram by taking earliest start times or latest start times of
activities on the X axis and cumulative resource required on Y axis.
3. Shift start times of non-critical activities having largest float first, in order to smoothen
the resources.

Crashing
(a) Basic Terms in crashing
As project duration/critical path
e.g

Possible path:
(i) A – C – E = 9 days
(ii) B – D – E = 12 days
Identify all the possible path & select the path which consumes the maximum duration.
Critical path is the longest path/maximum duration path.
e.g.

Possible path:
A – D – G – J = 15 days
A – C – E – H – J = 22 days
B – E – H – J = 16 days
A – D – F – H – J = 18 days
Critical path: A – C – E – H – J = 22 days. It means next project cannot start before 22 days.
b) Crashing: Project duration is to be reduced by incurring some extra cost.
c) Direct cost: Direct cost means the cost which can be directly trouble with a particular
activity. Direct cost is to be increased if the duration of any activities will be reduced
due to extra labour to be appointed at higher rates/overtime premium for the existing
labour.

144 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 d) Indirect cost: Indirect cost means the cost which cannot be directly identified with a
particular activity (commonly incurred) like superior’s salary, machine rent.
e.g. Activity 10 days Machine rent = ` 100 per day
Indirect cost = ` 100
Activity 8 days Indirect cost = ` 80
Indirect cost will be reduced as the duration of activity decreases.
e) Total cost: Direct cost of project + indirect cost of project duration.
e.g

Machine rent = 200 per day × 15 = ` 3,000

Direct cost
A 500
B 600
C 900
D 1,000
E 1,000
4,000
Total cost = `3,000 +` 4,000 =` 7,000
Unavoidable fixed cost is not considered
Normal duration: The schedule time or predetermined times to complete an activity.
Normal cost: The direct cost an activity, to be completed within normal duration. Indirect cost is
not considered in normal cost
Crash duration/crash time: The minimum time is to be incurred to complete the activity within
crash duration.
Crash cost: crash cost means the total cost which is to be incurred to complete the activity within
crash duration

Extra cost per day i.e. cost slope = Change in Cost / Change in Time
= Crash Cost – Normal cost / Normal Time – Crash Time

Cost slope = 3,000 – 2,000 / 5 -3

= 500 per day

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 145

Procedure
Step 1: Draw the network.
Step 2: Identify the critical path along with other paths.
Step 3: Calculate the total cost.
Step 4: Identify the cost slope per each activity and the possible of days.
Step 5: Reduce the duration of critical path so that project duration reduced and equals to the
duration of next critical path. The above process is to be achieved by selecting the activity which
have least cost slope.
Step 6: when two paths have the same duration then reduce both the path simultaneously by
preparing statement of comparative cost.

Float Calculation
‘EST’: Earliest start time of an activity

How to Identify ‘E’

identify all the leading paths towards the event and select the path which consumes the maximum
duration. That becomes ‘E’ for the required event.

How to Find Out ‘L’ of an Event

Identify all the leading path towards the event in reverse direction and select the path which has the
maximum duration and that path duration is to be subtracted from critical path.
EST = EST + Duration
LST is the delay in starting the activity without delaying the project duration.
LST = LST – Duration
Float: Waiting time of an activity. It means any activity can be delayed (waiting time) without delaying the
project duration. Float = LFT – EFT or LST – EST
Slack of event = L – E
(It is the float of event)
Free float = Total float – Slack of head event
Independent float = Free Float – Slack of tail event
Free float means a part of the total float by which an activity can be manipulated without changing the E
of next event.
Independent flaot means a part of total float by which an activity can be manipulated without changing
the E of preceding activity
146 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
 PRACTICAL PROBLEM
Problem: 1
Given the following information develop a network.

Activity A B C D
Immediate Predecessors — — A B

Problem: 2
Given the following information, develop a network.

Activity A B C D E
Immediate Predecessors — — A A C, B

Problem: 3
Given the following table develop a network:

Beginning event 1 1 2 3 3 4 5
Ending event 2 3 4 4 5 6 6
Activity 1–2 1–3 2–4 3–4 3–5 4–6 5–6

Problem: 4
For the following PERT diagram:

(i) Compute earliest event time and latest event time.

(ii) Critical path and total project duration.
(iii) Total, free and independent float for each activity.

Problem: 5
Given the following information, develop a network.
Activity Immediate predecessor
A ―
B ―
C A
D B
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 147
Problem: 6
Given the following information, develop a network.

Activity Immediate predecessor

A ―
B ―
C A
D A
E C, B

Problem: 7
Given the following information, develop a network.

Activity Immediate predecessor

A ―
B ―
C ―
D A
E B
F C
G D&E
H F&G

Problem: 8
Given the following information, develop a network.

Beginning Event Ending Event Activity

1 2 1-2
1 3 1-3
2 4 2-4
3 4 3-4
3 5 3-5
4 6 4-6
5 6 5-6
Problem: 9
Given the following information, develop a network.

Activity Time Activity Time

1-2 4 5-6 4
1-3 1 5-7 8
2-4 1 6-8 1
3-4 1 7-8 2
3-5 6 8-10 5
4-9 5 9-10 7

148 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 10
Draw a network diagram from following activities and find the critical path:

Job: A B C D E F G H I J K
Job (days) time 13 8 10 9 11 10 8 6 7 14 18
immediate:
Predecessor: ― A B C B E D, F E H G, I J

Problem: 11
Develop a network based on following information.

Activity Immediate Preceding

A ―
B ―
C A
D B
E C, D
F D
G E
H F

Problem: 12
An assembly is to be made from two parts A and B. Both parts must be turned on a lathe and B
must be polished whereas, A need not polished. The sequence of activities together with their
predecessors is given. Draw a network diagram for the project.

Activity Immediate Preceding

A Open work order None
B Get material for A A
C Get material for B A
D Turn A on lathe B
E Turn B on lathe B,C
F polish B E
G Assemble A and B D, F
H Pack G

Problem: 13

Activity A B C D E F G H I J K L
Dependence ― ― ― B, C A C E E D, F, H E IJ G
Duration 9 4 7 8 7 5 10 8 6 9 10 2
(days)
Calculate EST, EFT, LST, LFT
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 149
Problem: 14
Draw a network diagram from following activities and final critical path and total float & free float
of activities:

Job: A B C D E F G H I J K
Job (days) time 13 8 10 9 11 10 8 6 7 14 18
immediate:
Predecessor: ― A B C B E D, F E H G, I J

Problem: 15
The following table gives the activities and other relevant data for the project.

Activity Normal Time (days) Crash Time (days) Normal Cost (Rs.) Crash Cost
1-2 4 3 600 800
1-3 2 2 400 400
1-4 5 4 750 900
2-3 7 5 400 600
2-5 7 6 800 1,000
3-5 2 1 500 650
4-5 5 4 600 850

Indirect cost per day for the project is Rs. 200.

(i) Draw the network of the project.
(ii) Find the normal duration and cost of the project.
(iii) Find the optimum duration and cost of the project.
Solution:
(i) Network of the project

Total Possible Paths

1-2 -5 = 11 days
1-2-3-5 = 13 days
1-3-5 = 4 days
1-4-5 = 10 days
Critical Path = 1-2-3-5
150 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
 (ii) Normal Duration = 13 days
Normal Cost = Direct Cost + Indirect Cost
= Rs. 4,050 + Rs. 2,600
= Rs. 6,650
(iii) Calculation of optimum Duration and cost of the project.
Statement of cost slope
Activity Cost slope = crash cost – normal Maximum reduction in
cost / normal time – crash time days
1-2 200/1 = 200 1
1-3 0 Nil
1-4 150/1 = 150 1
2-3 200/2 = 100 2
2-5 200/1 = 200 1
3-5 150/1 = 150 1
4-5 250/1 = 250 1

Statement of Crashing
Possible Path Duration 1 (days) 2(days) 3(days) 4(days)
(days)
1-2-5 11 11 10 9
1-2-3-5 13 11 10 9 Not
1-3-5 4 4 4 4 Possible
1-4-5 10 10 10 9
Total Cost (Rs.) 6,650 6,450 6,450 6,750

Crashing- 1
Crash 2-3 by ‘2’ days
Total cost = Rs. 6,650 + Rs. 200 – Rs. 400
= Rs. 6,450
Crashing- 2
Crash 1-2 by ‘1’ day.
Total cost = Rs. 6,450 + Rs. 200 – Rs. 200
= Rs. 6,450

Crashing- 1
Crash 2-5, 3-5, and 1-4 by ‘1’ day
Total cost = Rs. 6,650 + Rs. 200 + Rs. 150 + Rs. 150 – Rs. 200
= Rs. 6,750
Hence, Optimum Duration = 9 days.
Cost of Project = Rs. 6,750

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 151

Problem: 16
The following table gives data on normal time cost and crash time-cost for the project:

Activity Normal Time Crash Time Cost (Rs.) Cost (Rs.)

(days) (days)
1-2 6 4 600 1,000
1-3 4 2 600 2,000
2-4 5 3 500 1,500
2-5 3 1 450 650
3-4 6 4 900 2,000
4-6 8 4 800 3,000
5-6 4 2 400 1,000
6-7 3 2 450 800

Indirect cost per day for the project is Rs. 100.

(i) Draw the network and identify the critical path..
(ii) What are the normal project duration and associated cost?
(iii) Crash the relevant activities systematically and determine the optimum project
completion time and cost

Problem: 17
A small project is having activities. The relevant data about these activities is given below:

Activity Dependence Normal Crash Normal Cost Crash Cost

Duration Duration
A ― 7 5 500 900
B A 4 2 400 600
C A 5 5 500 500
D A 6 4 800 1,000
E B, C 7 4 700 1,000
F C, D 5 2 800 1,400
G E, F 6 4 800 1,600

1. Find out normal duration and the minimum duration.

2. What is the percentage increase in cost to complete the project in 21 days?
Solution:

152 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Total Possible Path
A – B – E – G = 24 days
A – C – E – G = 25 days
A – C – F – G = 23 days
A – D – F – G = 24 days
Normal Duration of Project = 25 days
Calculation of Minimum Duration
Statement Showing Systematic Crashing (Duration after Crashing)
Possible Normal I (days) II (days) III (days) IV (days) V (days)
Path Duration
A-B-E-G 24 23 21 20 19 17
A-C-E-G 25 24 22 21 20 18
A-C-F-G 23 23 21 21 20 18
A-D-F-G 24 24 22 21 20 18
Total Cost
(Rs.) 4,500 4,600 5,000 5,200 5,200 6,300

Statement Showing cost slope

Activity crash cost – normal cost / Maximum Reduction
normal time – crash time in days
A 200 2
B 100 2
C ― ―
D 100 2
E 100 3
F 200 3
G 400 2

Crashing- 1
Crash Activity E by ‘1’ days
Total cost = Rs. 4,500 + Rs. 100 – NIL
= Rs. 4,600.
Crashing- 2
Statement of comparative cost

Common Activity Other least cost slope

A 1 200 E 1 100
&
D 1 100
200 200

Now, Crash Activity A by ‘2’ days

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 153
 Total cost = Rs. 4,500 + Rs. 200 × 2
= Rs. 5,000
Crashing- 3
Statement of comparative cost

Common Activity Other least cost slope

G 1 400 E 1 100
&
D 1 100
400 200

Crash Activities E and D for 1 day each

Total cost = Rs. 5,000 + Rs. 100 + Rs. 100
= Rs. 5,200
Crashing- 4
Statement of comparative cost

Common Activity Other least cost slope

G 1 400 E 1 100
&
F 1 100
400 200

Crash Activities E and F for 1 day each

Total cost = Rs. 5,200 + Rs. 100 + Rs. 200
= Rs. 5,500

Crashing- 5
Crash Activities G by 2 days
Total cost = Rs. 5,500 + Rs. 400 × 2 = Rs. 6,300
1. Normal Duration = 25 days
Minimum Duration = 18 days
2. Calculation of percentage increase in cost
Normal Cost = Rs. 4,500
Optimum Cost = Rs. 5,200
Due to crashing up to 21 days
Change in cost = Rs. 7,500
% increase in cost = Rs.700/ Rs.4500 × 100
= 15.55%

154 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 18
The following table gives the activities and other relevant data for the project.

Activity Normal Time (days) Crash Time (days) Normal Cost (Rs.) Crash Cost
1-2 4 3 1,500 2,000
1-3 2 2 1,000 1,000
1-4 5 4 1,875 2,250
2-3 7 5 1,000 1,500
2-5 7 6 2,000 2,500
3-5 2 1 1,625 1,625
4-5 5 4 1,500 2,215

Indirect cost per day for the project is Rs. 500.

(1) Draw the network of the project.
(2) Determine the critical path and its duration.
(3) Find the optimum duration and the resultant cost of the project.
Solution:
(1) Network of the project

(2) Determination of critical path

Total Possible Paths
1-2 -5 = 11 days
1-2-3-5 = 13 days
1-3-5 = 4 days
1-4-5 = 10 days
Critical Path = 1-2-3-5
And its duration = 13 days

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 155

 (3)
Statement showing optimum duration and resultant cost of the project
project Duration After crashing

Possible Duration 1 (days) 2(days) 3(days) 4(days)

Path (days)
1-2-5 11 11 10 9
1-2-3-5 13 11 10 9 Not
1-3-5 4 4 4 4 Possible
1-4-5 10 10 10 9
Total Cost 6,650 6,450 6,450 6,750
(Rs.)

Hence, optimum duration = 9 days

And resultant cost = Rs. 16,875

W.N-1
Statement of cost slope
Activity Cost slope = crash cost – normal Maximum reduction in
cost / normal time – crash time days
1-2 500 1
1-3 - -
1-4 375 1
2-3 250 2
2-5 250 2
2-5 500 1
3-5 375 1
4-5 715 1

W.N-2
Crashing- 1
Crash 2-3 Activity by 2 day
Total cost = Rs. 16,625 + Rs. 500 – Rs. 500 × 2
= Rs. 16,125
Crashing- 2
Crash 1-2 Activity by 1 day
Total cost = Rs. 16,125 + Rs. 500 – Rs. 500
= Rs. 16,125
Crashing- 3
Crash 2-5, 3-5 and 1-4 Activity by 1 day each,
Total cost = Rs. 16,125 + Rs. 500 + Rs. 375 + Rs. 375 – Rs. 500
= Rs. 16,875

156 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 19
The following information is given below:

Activity 1-2 2-3 2-4 3-5 4-6 5-6 5-7 6-7

Pessimistic 3 9 6 8 8 0 5 8
Time(in weeks)
Most likely time 3 6 4 6 6 0 4 5
(in weeks)
Optimistic Time 3 3 2 4 4 0 3 2
(in weeks)

Draw the Network diagram for the above. Calculate:

(i) Variance to each activity.
(ii) Critical path and expected project length.
(iii) The probability that will be completed in 23 weeks.
Solution:
(i) Calculation of variance of each Activity

Activity Pessimistic Time (tp) Optimistic Time (to) Variance = {to – tp/6}
1-2 3 3 0
2-3 9 3 1
2-4 6 2 0.4444
3-4 8 4 0.444
4-6 8 4 0.444
5-6 0 0 0
5-7 5 3 0.1111
6-7 8 2 1

Determination of Critical Path and expected project length

Expected time = [to + tp + 4m/6]

Total possible paths
1-2-3-5-7 = 20 weeks

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 157

 1-2-3-5-7 = 18 weeks
1-2-4-6-7 = 18 weeks
Hence,
Critical path →1-2-3-5-6-7
And its duration = 20 weeks
(ii) Calculation of probability
Now, project variance = sum of variance of each activity on critical path
= 0 +1 + 0.444 + 0 + 1 = 2.444
∴Standard deviation of project = project variance
= 2.444
s = 1.5633
Mean (X) = 20 weeks
Probability
 X - X
Z = pz ≤
 σ 
= p(Z ≤ ∞)
= P ( - ∞ to 0) + P (0 +1.92)
= 50% + 47.26% = 97.26%

Problem: 20
A small project is composed of seven activities whose estimates are listed in the table as follows:
Advanced Management Accounting: Theory and Practices
Activity Estimated duration (weeks)
I J optimistic Most likely pessimistic
1 2 1 1 7
1 3 1 4 7
1 4 2 2 8
2 5 1 1 1
3 5 2 5 14
4 6 2 5 8
5 6 3 6 15

1. Draw the project network.

2. Find the expected duration and variance of each activity. What is the expected project
length?
3. Calculate the variance and standard deviation of project. What is the probability that the
project will be completed:
1) At least 4 weeks than expected?
2) No more than 4 weeks earlier than expected?
3) If the project due date is 19 weeks. What is the probability of meeting the due date?

158 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 UNIT 7

MAINTENANCE MANAGEMENT

Introduction:-
Maintenance means function by which items kept as good condition
Maintenance is a function to bringing back or restores an item to its original position. By
maintenance the item is kept as workable position.
It may be defined as follows the activities by which goods items or machine kept as usable
and working position
It is also a preventive measure from wear & tear and insolences

Objective of Maintenance:-
(i) To keep all the production facilities and its related facilities in an optimum working
condition.
(ii) To ensure accuracy to product.
(iii) To ensure the time schedule of delivery to customers
(iv) To minimize the breakdown to the machine.
(v) To keep the product cycle within the time range.
(vi) To modify the machine tools to meet the augmented need for production
(vii) To improve the productivity
(viii) To avoid sinking of additional capital.
(ix) To minimization of maintenance cost.
(x) To extend the life of machinery and plant.

Break Down Maintenance

Break down means fail mechanically or cease to function.
Production is continuing without routine maintenance until it break down. Once machine in
break down then action in taken for finding the cause of break down and identify defects. After
the defects and cause remove the fault by which break down takes place:
Break down is random in nature and machine cannot be used during the repair time. It reduces
the productivity.

Preventive Maintenance
Preventive maintenance based on principle that prevention is better than cure preventive
maintenance minimize the breakdown problem. It locates the weak part in all equipment and
also provide regular inspection. The system of preventive maintenance various from plant to
plant depending on requirement of the plant.
The analytical approach to evaluate the work done by preventive maintenance is
Inspectionsincomplete
(i) × 100 Should be less than 10%
Inspections scheduled
Hoursworked for ma int enance
(ii) Performance of Dept = × 100
Schedule hours

Downtime inhours
(iii) = Working days × Hour per day × number of machine.
Available hours
Number of Breakdown
(iv) Frequency of Breakdowns =
Available machineHrs

Labour Hrs scheduled maintenanace

(v) Effectiveness of Planning =
Total labour Hrs spent onmaintenance
Or
Downtime scheduled maintenanace
=
Downtimeduetototal maintenancework

Advantage of Preventive Maintenance

(i) Reduce the Breakdowns and down time.
(ii) Greater safety to workers.
(iii) Fewer large scale repairs.
(iv) Less stand by or reserve equipment or spares.
(v) Lower unit cost of the product manufactured.
(vi) Better product quality.
(vii) Increased equipment life.
(viii) Better industrial relation.

Routine Maintenance:-
It includes lubrication, cleaning periodical, overhaul etc. it is the work which can be carried out
while the facility is in service.

Obsolescence, Replacement of Machinery

Wear and obsolescence are the two main causes for replacement of machinery in every aspect
of life. The reduction of wear is therefore a primary concern when designing appliances. Wear
and tear due to passage of time and / or normal usage of plant and machinery is an accepted
fact. Technological obsolescence is a major danger which business firms face in modem era.
With the development of new and better techniques or equipment of performing a particular
function, existing equipment and machines becomes uneconomical machine. Whenever a firm
decides to switch over to new machines or improved product designs, existing machine design
are said to be obsolete. Hence, obsolescence is a major issue in the procurement and installation
of machinery and equipment. A machine is technically obsolete when another can do the same
job more efficiently with reduced time and also at a lower cost. Technological obsolescence arises
160 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
due to continuous improvement in the method and techniques of production and sometimes the
rate of improvement is so fast that it becomes economical to replace the machinery before its
expected life. A machine may be replaced to reduce the running costs of the concerned machine
and the new machines productivity will be more. In replacement decisions the basic problem is to
decide whether to replace a machine or equipment at present or at a future date. It is therefore
necessary to determine whether obsolescence or deterioration has reached the point where the
reduction in operating costs expected from replacement justifies the net capital expenditure
involved in installing the new machine and disposing of the old one.
Any function aimed at brining back or restore an item to its original or acceptable position or
to keep it and retain its healthy, workable position is known as maintenance.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 161

 PRACTICAL PROBLEM
Problem: 1
A workshop has 20 nos. of identical machines. The failure pattern of the machine is given below:

Elapsed time after Maintenance attention (in month) Probability

1 0.20
2 0.15
3 0.15
4 0.15
5 0.15
6 0.20

It costs Rs. 150 to attend a failed machine and rectify the same. Compute the yearly cost of
serving the broken down machines.

Problem: 2
A public transport system is experiencing the following number of break downs for months over
the past 2 years in their new fleet of vehicles:

Number of breakdowns 0 1 2 3 4
Number of months this occurred 2 8 10 3 1

Each break down cost the firm an average of Rs. 2,800. for a cost of Rs. 1,500 per month, preventive
maintenance can be carried out to limit the breakdowns to an average of one per month. Which
policy is suitable for the firm?

Problem: 3
Indian Electronics manufactures TV sets and carries out the picture tube testing for 2000 hours.
A sample of 100 tubes was put through this quality test during which two tubes failed. If the
average usage of TV by the customer is 4 hours / day and if 10,000 TV sets were sold then in one
year how many tubes were expected to fail and what is the mean time between failures for these
tubes?

Problem: 4
A company has 50 identical machines in its facilities. The cost of preventive servicing (Cp) is Rs.
20, and the cost of repair after breakdown (CR) is Rs. 100. The company seeks the minimum
cost preventive servicing frequency and has collected the data on breakdown probabilities in the
following table.
Probability of machine breakdown, by month:

Months after servicing that Probability that breakdown i. Pi

breakdown occurs (i) will occur (Pi)
1 0.10 0.10
2 0.05 0.10
3 0.05 0.15
4 0.10 0.40

162 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 5 0.15 0.75
6 0.15 0.90
7 0.20 1.40
8 0.20 1.60
Total 1.00 5.40

Problem: 5
PQR company has record of breakdowns of its machines for a 300 days work year as shown below:

No. of breakdowns Frequency in days

0 40
1 150
2 70
3 30
4 10

The firm estimates that each breakdown cost RS 650/- and is considering adopting a preventive
maintenance program which would cost Rs 200 per day and limit the number of breakdown to an
average of one per day. What is expected annual saving from preventive maintenance program?

Problem: 6
In a simulated operation, a firm maintenance crew received request for service and provided
service during an 8 hours period as shown below:

Request arrival (clock) time Service time (hours)

0.00 1.5
1.00 0.5
3.30 2.0
4.00 0.5
7.00 1.0

The maintenance labour cost is Rs 140 per hours and delay cost is Rs 450 per hours
(a) Find idle time cost for maintenance cost
(b) Find the delay time cost for machine.

Problem: 7
The number of breakdowns of equipment over the past 2 years is as below :

No. of breakdowns No. of month this occurred

0 3
1 7
2 9
3 3
4 2
Total 24
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 163
Each break down costs an average of `300/-. Preventive maintenance service can be hired at
a cost of `150 per month and it will limit the breakdowns to an average of one per month.
Which maintenance arrangement is preferable, the current breakdown maintenance policy or a
preventive maintenance service contract?

Problem: 8
Request for maintenance service made upon a centralized maintenance facility have been
simulated for a typical 8 hour shift with arrival and service pattern as shown below:

Request arrival (clock) time Repair service time

1:30 60 mins.
2:00 20 mins.
4:15 45 mins.
4:30 120 mins.
5.30 30 mins.
7:00 10 mins.

The labour charges of maintenance crew is ` 40 per hour whether working or idle. The waiting
time of operators and machinery that has broken-down is cost at ` 70 per hour.
(a) Find the idle time cost of the maintenance facility.
(b) Find the waiting time cost of operators and machinery (not including repair time).
(c) Find the total facility idle time and machinery waiting time cost.
(d) Assuming that for an additional cost of ` 10 per hour the maintenance centre could add
another crew and decrease the repair time by one third, would the additional cost be
justified?

Problem: 9
The probability of failure of a replaceable item is given below. There are four such similar
replaceable items. The maintenance manager is thinking of a group replacement of all the four
items when any one of them fails. The cost of replacing a part individually is ` 100, but the cost of
replacing all the four items together is only ` 200.
(a) What is the cost per month of such a group breakdown replacement policy?
(b) How does the cost for the above policy compare with the cost for Independent
breakdown replacement

Month Probability
1 0.1
2 0.2
3 0.3
4 0.4

164 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 10
The breakdown probability of an equipment is given below

Month Probability
1 0.05
2 0.15
3 0.30
4 0.30
5 0.20

There are 50 such equipment in plant . The cost of individual preventive replacement is `15
per equipment and cost of individual replacement is `30 per equipment. Which is most suitable
maintenance policy.

Problem: 11
The breakdown probability of an equipment is given below

Month Probability
1 0.05
2 0.15
3 0.30
4 0.30
5 0.20

If cost preventive group replacement is `500 for the entire group of 50 equipment determine
(a) Most economical group preventive replacement policy .
(b) The most economical policy between individual preventive replacement and group
preventive replacement.

Problem: 12
MTC has a fleet of 50 trucks. the past data on the breakdown of the trucks shows the following
probability distribution

Month after Maintenance Probability

1 0.1
` 0.2
3 0.3
4 0.4

Each breakdown cost `3000on an average. The manager of MTC knows the importance of
preventive maintenance and estimates the preventive maintenance cost per preventive action.
Which maintenance policy is sutable.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 165

 REPLACEMENT THEORY

Introduction
Replacement theory is concerned with situations where efficiency diminishes with the passes of
time and it is desired to restore it by taking some remedial action.

Replacement of Machines and Equipment

Machines are purchased and replacement of old machines-are made mainly for two reasons:
1. To increase the productive capacity and
2. To reduce cost of production.
Various other reasons for replacement are the following:
1. To get rid of worn out, broken down or obsolete machines,
2. To accommodate larger sizes of work and increase the machine capacity,
3. To reduce labour cost by introducing semi-automatic machines or machines more than
one of which can be operated by a single operator,
4. To simplify operations by using automatic machines which are capable of performing
variety of work usually performed by a number of different machines,
5. To minimize repair cost and reduce idle time.
An analysis of the above five reasons will lead to either increase in capacity or reduction in cost
or both.

Factors on which equipment is replaced:

The replacement plan depends on evaluation of present and replacement machines from the
point of view of technical suitability and cost saving features.
The points to check for replacement studies vary from industry, to industry on management
conditions and management policies. But some factors are common to practically all cases.
These are:

Technical Factors:
(i) Inadequacy from the stand point of range, speed, accuracy, strength, rigidity, output
and capacity,
(ii) Obsolescence and equipment worn out condition,
(iii) Special advantage of the new machine as to easiness of set ups convenience of operation,
safety, reliability performance, control panels and special features,
(iv) Flexibility and versatility of the machine.

Cost Factors:
(i) High repair cost of existing machine,
(ii) High remodeling cost of existing machine,
(iii) Less chance of spoilage and rejection work causing: saving in cost,
(iv) Faster rate of production causes lower cost,

166 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

(v) Replacement of skilled -workers by semi-skilled and: unskilled workers which reduces the
labour cost
(vi) Compactness of the machine leading to a saving in-space which means saving of
overhead costs,
(vii) Machine pay back period i.e. how soon the cost of the equipment is recovered,
(viii) Life of the new machine giving effective service,
(ix) Flexibility and versatility of the machine tending to reduce idle time cost with changes
in methods of production-which might occur in future,
(x) Availability of funds for the acquisition of the equipment or possibility of special
arrangement like hire-purchase or government loans or other accommodations.

Replacement Programmes
It is prudent to have phased .policies of machine replacement plans than to wait until breakdowns
occur causing production hold ups. There are different forms of the programme.
1. A definite amount of money or a certain percentage of earning of the company is used
each year to replace existing machines which are either superseded by improved models
or are not in tip top condition or are having insufficient capacity.
2. Replacement is made of the oldest or most inadequate machine each year by upto date
machines of greater accuracy or higher capacity. Some times automatic machines are
gradually introduced in this way which is capable of doing several operations with lesser
number of operators.
3. The economy of working on various machines are studied .and replacement of machines
are made only to have a definite cost reduction.

The theory of replacement is broad in scope and is generally applied in the following
three situations:
(i) When the existing assets have lost their utility because they have outlived their effective
life. Though they might be good technically yet on economic considerations, due to
increasing maintenance cost it is not worthwhile to continue with them. Examples are:
machinery, equipment, buildings etc.
(ii) When the existing units suddenly completely fail. Light bulbs, tubes and T.V. parts are
the examples. Bulbs give adequate service before they fail all of a sudden.
(iii) The existing working staff in an organization gradually diminishes due to death,
retirement, retrenchment and other reasons. The replacements are thus needed.

Failure mechanism of items :

There are two types of failure: 1. Gradual failure, 2. Sudden failure
1. Gradual failure: The failure mechanism under gradual failure is progressive. It means life
of an item increases, its efficiency decreases.
2. Sudden failure:

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 167

Replacement Policy for Equipment which Deteriorates Gradually:-
(When money value remains constant). The cost of maintenance of a machine is given as a
function increasing with time and its scrap value is constant.
(i) If time is measured continuously, then the average annual cost will be minimized by
replacing the equipment when the average cost to date become equal to the current
maintenance cost.
(ii) If time is measured in discrete units then the average annual cost will be minimized by
replacing the equipment when the next periods’ maintenance cost becomes greater
than the current average cost.
Let C = the purchase price of the equipment
S = the scrap (or salvage) value of the equipment at the end of n years
and M(t) = the maintenance cost of the equipment in year t.
Cost of piece of equipment over a given period of years
= Purchase price – Value of equipment after n years
+ Maintenance cost for n years
n
\ Total cost, TCn = (C – S) + ∑ M(t)
t =1

Correspondingly the average cost, ATCn would be defined as:

1 
n
The average cost, ATC=
n (C − S) +
n  ∑ M(t)
 t =1

The optimum replacement period would be the one corresponding to which ATCn would
be the minimum.

Replacement Policy for Equipment when Time Value of Money is taken:

Step 1. Obtain the present value of the maintenance cost for each of the years by multiplying
the cost value by an appropriate present value factor which is based on the given rate of
discount and the time.
Step 2. Accumulate present values (obtained in step 1) up to each of the years 1, 2, 3, …. And
add the cost of the equipment to each of these values.
Step 3. Accumulate present value factors upto each of the years 1, 2, 3, ….
Step 4. Find the annualised costs for the various years by dividing the cost plus cumulative
maintenance costs for each year (obtained in step 2) by the corresponding cumulative
present value factors in step 3.
Step 5. Follow the following rule to decide on the replacement.
(i) Do not replace if the next period’s cost is less than the weighted average of the
previous costs, and
(ii) Replace if the next period’s cost is greater than the weighted average of the
previous cost.

168 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 Problems on Replacement Theory
Problem: 1
A truck owner from his past experience estimates that the maintenance cost per year of a truck
whose purchase price is Rs.1,50,000 and the resale value of truck will be as follows:

Year 1 2 3 4 5 6 7 8
Maintenance 10,000 50,000 20,000 25,000 30000 40000 45,000 50,000
(in `) M(t)
Resale value 130000 120000 115000 105000 90000 75000 60,000 50,000
(in `) S(t)

Determine at which time it is profitable to replace the truck.

Problem: 2
XYZ manufacturing company is using a machine whose purchase price is Rs. 65,000. The installation
charges amount to Rs. 18,000 and the machine has a scrap value of only Rs. 8,000 because the
firm has a monopoly of this type of work. The maintenance cost in various years is given in the
following table:

Year 1 2 3 4 5 6 7 8 9
Maintenance 1250 3750 5000 7500 10,500 14,500 20,000 24,000 30,000
cost (`)

Determine after how many years should the machine be replaced, assuming that the machine
replacement can be done only at the year – ends.

Problem: 3
A taxi owner estimates from his past records that the costs per year for operating a taxi whose
purchase price when new is Rs. 60,000 are as given below:

Age 1 2 3 4 5
Operating cost (`) 10,000 12,000 15,000 18,000 20,000

After 5 years, the operating cost = 6,000k, where k = 6, 7, 8, 9, 10 (k denoting age in years)
If the resale value decreases by 10% of purchase price each year, what is the best replacement
policy? Cost of money is zero.

Problem: 4
A plant manager is considering replacement policy for a new machine. He estimates the following
costs (all costs in rupees).

Year 1 2 3 4 5 6
Replacement cost at beginning of year(`) 100 110 125 140 160 190
Salvage value at end of year (`) 60 50 40 25 10 0
Operating costs (`) 25 30 40 50 65 80

Find an optimum replacement policy and corresponding minimum cost.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 169

Problem: 5
The data collected in running a machine, the cost of which is Rs. 60,000 are given below:

Year 1 2 3 4 5
Resale value (`) 42,000 30,000 20,400 14,400 9,650
Cost of spares (`) 4,000 4,270 4,880 5,700 6,800
Cost of labour (`) 14,000 16,000 18,000 21,000 25,000

Determine the optimum period for replacement of the machine.

Problem: 6
Machine A costs ` 45,000 and the operating costs are estimated at ` 1,000 for the first year
increasing by ` 10,000 per year in the second and subsequent years Machine B costs ` 50,000 and
operating costs are ` 2,000 for the first year, increasing by ` 4,000 in the second and subsequent
years. If we now have a machine of type A, should we replace it with B? If so when? Assume that
both machines have no resale value and future costs are not discounted.

Problem: 7
The initial cost of a machine is ` 30,000 and running or operating expenditure which increases
with age of the machine is given below:

Year 1 2 3 4 5 6 7
Running cost (`) 5,000 6,000 8,000 10,000 13,000 16,000 20,000

What is the replacement policy? When this machine should be replaced it is given that the rate of
interest is 10% and scrap value is nil?

Problem: 8
An engineering company is offered two types of material handling equipments A and B. a is
priced at ` 60,000 including cost of installation and the costs for operation and maintenance are
estimated to be ` 10,000 for each of the first five years, increasing every year by ` 3,000 per year
in the sixth and subsequent years. Equipment B with rated capacity same as A, requires and initial
investment of ` 30,000 but in terms of operation and maintenance costs more than A. these costs
for B are estimated to be ` 13,000 per year for the first six years, increasing every year by ` 4,000
per year from seventh year onwards. The company expects a return of 10% on all its investments.
Neglecting the scrap value of the equipment at the end of its economic life determine which
equipment the company should buy.

Problem: 9
A Company has the option to buy one of the mini computers: MMINICOMP and CHIPCOMP.
MINICOMP costs ` 5 lakhs and running and maintenance cost are ` 60,000 for each of the five
years increasing by ` 20,000 per years in the sixth and subsequent years. CHIPCOMP has the
same capacity as MINICOMP, but costs only ` 2, 50,000. However its running and maintenance
costs are ` 1,20,000 per year in the first five years and increase by ` 20,000 per year thereafter. If
the money is worth 10% per year, which computer should be purchased? What are the optimum
replacement periods for each one of the computers? Assume that there is no salvage value for
either computer. Explain your analysis.

170 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Problem: 10
The following mortality rates have been observed for a special type of light bulbs:

Month 1 2 3 4 5
% Failing at the end of month 10 25 50 80 100

In a industrial unit there are 1000 special type of bulbs in use, and it costs `10 to replace an
individual bulb which has burnt out. If all bulbs were replaced simultaneously it would cost
` 2.50 per bulb. It is proposed to replace all bulbs at fixed intervals, whether or not they have
burnt out and to continue replacing burnt out bulbs as they fail. At what intervals of time the
manager should replace all the bulbs?

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 171

 UNIT 8

SOME IMPORTANT QUESTIONS

WITH SOLUTIONS

Problem 1:
A component can be manufactured either on centre lathe or on a turret lathe. The cost and time
information to process a component is given below.

Particulars Centre lathe Turret lathe

• Setup time 30 minutes 90 minutes
• Processing time 10 minutes 5 minutes
• Tooling up cost (Rs.) 200 500
• Labour cost/hr Rs.2 Rs.2
• Depreciation and other cost per hour Rs.10 Rs. 20

The tooling costs are to be recovered within a year. There are no repeat orders. The requirements
are to be met in two lots.
(i) Find the quantity at which both alternatives results in equal cost. (BEP)
(ii) Give the decision rule regarding the choice of lathes
(iii) If the quantity required is 800 Nos./year, which of the machine do you propose?
Solution:
Let F1 = Fixed cost for the centre lathe. Fixed cost consists of set-up and tooling up costs.
\ Fixed cost for centre lathe (F1) = Set-up cost + Tooling up cost
F1 = No. of set-ups × set-up time/set-up × [(set-up labour rate)
+ (Depreciation and other expense/hr)] + tooling up costs.

 2 × 30 
 60 × (10 + 2)  + 200 =
212 ( ` )

 2 × 90 
Similarly, Fixed cost of turret lathe (F2) =  × (20 + 2)  + 500 =
` 566
 60 
Variable cost for centre lathe = V1
V1 = Processing time × [(Labour cost/hr + Depreciation and other cost/hr)]
10
= (10 +=
2) Rs. 2 / piece
60
5
Variable cost for turret (V2) V2 = (20 + 2) = 1.83 Rs. /piece.
60
Let, Quantity at which both alternatives gives equal cost be Q
Total cost of center lathe = Total cost of turret lathe
212 + 2Q = 566 – 1.83Q
Thus the break-even quantity is 2083 pieces.
2. Decision Rule
(i) If quantity is below 2083, Centre lathe is preferred because of lower fixed cost.
(ii) For quantities above 2083, turret lathe is preferred.
(iii) For quantity 2083, both are equally feasible select either of the two machines.

Problem 2:
A Company’s fixed and variable costs for manufacturing a component on three alternative
machines are given below formulate the decision rules for selecting the machines.

Fixed Cost (Rs.) Variable Cost

(Rs/unit)
Engine lathe 5 0.20
Capstan lathe 30 0.10
Automat 70 0.05

Solution:
The total cost = fixed cost + [variable cost / unit × no. of units]
Let, Tc1, Tc2 and Tc3 be the total costs for engine lathe, capstan lathe and automat respectively.
Let, ‘x’ be the number of units to be manufactured Then,
Total cost on Engine lathe (Tc1) = 5 + 0.2x
Total cost on Capstan lathe (Tc2) = 30 + 0.1x
Total cost on Automat (Tc3) = 70 + 0.05x
Now, comparing the Tc1 and Tc2.
\ 5 + 0.2x = 30 + 0.1x
0.1x = 25
x = 250
Comparing the Tc2 and Tc3
At B.E.P. Tc2 and Tc3
\ 30 + 0.1x = 70 +0.5x
\ 0.05x = 40
\ x = 800

Decision Rules
(i) If the quantity is below 300, select engine lathe
(ii) Between 300 to 800, select capstan lathe
(iii) Above 800, Automat is to be selected.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 173

Problem: 3
A job is performed on the milling machine. The following details are given below:
Standard time for job = 6 minutes
No. of jobs to be produced = 70,000 jobs
Machine capacity = 2000 hrs/month
Machine utilization =90%
Computer the number of machines required.
Solution:
6 1
Standard Time (ST) = = hrs.
10 10
Maximum Production (MP) = 70,000
Machine Capacity (MC) = 2000 hrs/month
Utilisation of capacity (UC) = 0.9
\ No. of Machines required (N)
ST × MP 0.1 × 70,000
=N = = 3.88 Machines = 4 Machines
MC × UC 2,000 × 0.9
Problem 4:
A company wants to expand the solid propellant manufacturing plant by the addition of more
1 tonne capacity curing furnace. Each tonne of propellant must undergo 30 minutes of furnace
time including loading and unloading operation. Furnace is used only 80 per cent of the time due
to power restriction. The required output for the new layout is to be 16 tonnes per shift (8 hours).
Plant efficiency (system) is estimated at 50 per cent of system capacity
(a) Determine the number of furnaces required
(b) Estimate the percentage of time the furnace will be idle
Solution:
Actual output 16 tonnes /shift
Required system capacity = = = 32.0 tones/shift
System Efficiency 0.5
32 tonnes /shift
Required furnace capacity (hrs) = = 5 tonnes/hrs.
0.8 × 8hrs /shift
1 tonne
Individual furnace capacity = = 2 tonnes/hr per furnace
0.5hr
Required furnace capacity
(i) Number of furnaces required (N) =
Individual furnace capacity
5 tonnes /hr
N = = 2.5 furnaces (say 3)
2tonnes /hr /per furnace
(ii) Total Hours available per shift =3 furnace @8 hours = 24 furnaces hrs
(iii) Total Hours of actual use per shift = 16 tonnes × 0.5 hr/tones
= 8 furnaces hr Idle hours = 24 – 8 = 16 hours.
5 tonnes idle
Percentage idle time = = 66.66% = 67% Idle time.
2hrs total
174 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
Problem 5:
A lathe machine is used for turning operation and it takes 30 minutes to process the component.
Efficiency of the lathe is 90 per cent and scrap is 20 per cent. The desired output is 600 pieces per
week. Consider 48 hours per week. Determine the number of lathes required?
Solution:
Assuming 50 weeks in a year.
The output per annum = 600 × 50 = 30,000 units.
The scarp rate is 20%.
Required output 30,000
\  The quantity to be produced (including scarp) = = 37,500 units.
(1 − Scrap rate) (1 − 0.2)
30
Total time required for turning = 37,500 × = 18,750 hours
60
18,750
Production time required with 90 per cent efficiency = = 20833.3 hours
0.9
Time available per lathe per annum = 48 × 50 = 2400 hrs.
Time required (hrs) 20833.3
\ Number of lathes required = = = 8.68 = 9
Time available (hrs) 2400
\ No. of lathes required = 9

Problem: 6
A component is to be processed on two machines lathe and milling machine. The sequence of
operation is first turning and then milling.
The machine times are given below:
Turning 12 minutes.
Milling 20 minutes.
1. Estimate the number of machines required to machine 2500 components per week if
available machine hours per week are 48.
2. What are the steps that you propose to reduce number of machines.
Solution:
1. No. of components required to be machined = 2500/week
The available time (in hr.) per week = 48
Assuming 50 weeks in a year, no. of components to be machined/annum = 2500 × 50
= 1,25,000 annum.
12
The time required for turning of 1,25,000 components = 1,25,000 × = 25,000 hrs
60
Time available per annum = 48 × 50 = 2400 hrs.
No. of lathes required = 25000/2400 = 10.41 = 11
20
1,25,000 ×
No. of milling machines required = = 60 17.36
= 18
2400
2. Steps to reduce the number of machines. Increase the number of shifts. Additional of
second shift is going to reduce the number of machine by 50 per cent.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 175

Problem: 7
The component can be processed on either of the two machines– Turret lathe and Center lathe.
The time and cost details are given below.
Computer the breakeven quantity and state the decision rules.

Particulars Turrette Lathe Centre Lathe

1. Setup time (hrs.) 4.5 0.2
2. Operation time/ piece (min) 4.0 35
3. Setup cost/hour (Rs.) 350 15
4. Machining cost/hour (Rs.) 45 25

Solution:
Breakeven quantity refers to the quantity at which both the alternatives are equally feasible and
the total cost of both alternatives are equal
Let ‘Q’ be the breakeven quantity
Total costof production on Turrette lathe = Total cost of production on center lathe
= [Setup cost + operation cost]Turret
= [Setup cost + operation cost]Center

4  35
= [ 4.5 × 350] +  × Q × 45=
 60 
[ 0.2 × 15] +  60 × Q × 25
Or, 1575 + 3Q = 3 + 14.58Q
Or, 11.58Q = 1572
Or, Q = 136 units
If the quantity is ≤ 136, Center lathe is preferred
If the quantity is ≤ 136, Turrette Lathe is preferred.

Problem: 8
A customer is processed through each of the three operation A, B and C, in sequence. The process
is designed to handle 100 customers a day. The average rate at which each operation can process
customers is shown in the figure below:

(i) For an 8 hour day identify any bottlenecks in the process.

(ii) What will bottlenecks have on overall output and other operations?
(iii) It all the processes are operated for 10 hours per day, is there still a bottleneck?
(iv) How will random arrivals affect the output and processing rate of this process?

176 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

Solution:
(i) Identification bottleneck for an 8 hour a day operation.
Operation A, Output for 8 hrs/day = 15 × 8 = 120 customers
Operation B, Output for 8 hrs/day = 10 × 8 = 80 customers
Operation C, Output for 8 hrs/day = 12 × 8 = 96 customers
Looking into the above calculations, the operations B which process 10 customer/hr and
80 customers a day becomes the bottleneck.
(ii) Effect of the bottleneck on the overall output.
The bottleneck operation decides the capacity and output. Here the capacity of the unit
is 80 customer/day (due to bottleneck B) even though the process A and C have the
output of 120 and 96 respectively.
(a) Effect of the bottleneck on other operation. Bottleneck operation B, makes the
waiting time higher for C. Because of difference in out (C > B), facility has to wait
fill the customer comes from B.
(b) In case A, the operation will be completed and because of difference in processing
rates, operation A will be idle for 25% time unless it is used for other purpose and
the full capacity of A if used creates an inventory between A and B.
(iii) If all the processes are operated for 10 hrs, then the designed output of 100 customers/
hr. are achieved still the process line is unbalanced as the processing capacities are
unequal.
(iv) Random arrivals affect the output and processing of customers.
The random arrivals affect the capacity utilisation also both capacity idle time and
shortage.

Problem: 9
The following data is available for a manufacturing unit:
No. of operation : 15
Daily working hours : 8
No. of days per month : 25
Std. production per month : 300 units
Std. Labour hours per unit : 8

The following information was obtained for November 2007

Man days lost due to absenteeism : 30
Unit produced : 240
I idle Time : 276 man hours
Find the following:-
(a) Percent absenteeism’
(b) Efficiency of utilisation of labour
(c) Productive efficiency of labour
(d) Overall productivity of labour in terms of units produced per man per month.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 177

Solution:
No. of days per month = 25
Daily working hrs. = 8
No. of operation = 15
No. of Man days = 15 × 25 = 375 Man days.
Total working hrs. = 375 × 8 = 3,000
Hours lost in absenteeism = 30 × 8 = 240
240hrs. × 100
(i) Percent absentness = = 8%
3000hrs.
S tandardhour to production 240units
(ii) Efficiency of utilization of labour =
Totallabour hour
240 × 8
= = 64%
3000
Standard time required to produce 240 units = 240 × 8 = 1920 labour-hours.
(iii)
In November, man hours lost = 30 × 8 = 240
In November idle time = 276
Total loss of time = 516 hours.
Productive hours available in November = 3000
Less, Total loss of time = 516
Actual labour-hours = 2484 hours
Std. Labour hrs 1920 × 100
Efficiency of labour = = = 77.3%
ActualLabour hrs 2484
(iv) 15 men produces 300 units.
Std. labour productivity = 300/15 = 20 units.
In November, overall productivity = 240/15 = 16 units (Ans) i.e. productivity falls
by 25%.

178 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 Objective Type Questions & Answers
Choosing of Correct Answers:
1. Number of product varieties that can be manufactured in Job production is:
(a) Limited to one or two, (b) Large varieties of products,
(c) One only, (d) None of the above.
Ans. (b)
2. Number of product varieties that can be manufactured in Mass production is:
(a) One only, (b) Two only,
(c) Few varities in large volumes, (d) Large varities in small volumes.
Ans. (c)
3. In general number of product varities that can be manufactured in Flow production is:
(a) One only, (b) Ten to twenty varities,
(c) Large varities, (d) Five only.
Ans. (a)
4. Generally the size of the order for production in Job production is:
(a) Small, (b) Large,
(c) Medium, (d) Very large.
Ans. (a)
5. Generally in continuous production the production is carried out to:
(a) Customer’s order, (b) Government orders only,
(c) For stock and supply, (d) Few rich customers.
Ans. (c)
6. Inventory cost per product in intermittent production is:
(a) Higher, (b) Lowest,
(c) Medium, (c) Abnormal.
Ans. (a)
7. The material handling cost per unit of product in Continuous production is:
(a) Highest compared to other systems, (b) Lower than other systems,
(c) Negligible, (d) Cannot say.
Ans. (b)
8. Routing and Scheduling becomes relatively complicated in
(a) Job production, (b) Batch production,
(c) Flow production, (d) Mass production.
Ans. (b)
9. The starting point of Production cycle is:
(a) Product design, (b) Production Planning,
(c) Routing, (d) Market research.
Ans. (d)

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 179

 10. Variety reduction is generally known as:
(a) Less varities, (b) Simplification,
(c) Reduced varities, (d) None of the above.
Ans. (b)
11. Preferred numbers are used to:
(a) To determine the number of varities that are to be manufactured,
(b) To the test the design of the product,
(c) To ascertain the quality level of the product,
(d) To evaluate the production cost.
Ans. (a)
12. The act of assessing the future and make provisions for it is known as
(a) Planning, (b) Forecasting,
(c) Assessment, (d) Scheduling.
Ans. (b)
13. For a marketing manager, the sales forecast is:
(a) Estimate of the amount of unit sales or a specified future period,
(b) Arranging the sales men to different segments of the market,
(c) To distribute the goods through transport to satisfy the market demand,
(d) To plan the sales methods.
Ans. (a)
14. The time horizon selected for forecasting depends on:
(a) The salability of the product, (b) The selling capacity of Salesman,
(c) Purpose for which forecast is made, (d) Time required for production cycle.
Ans. (c)
15. For production planning:
(a) Shot term forecasting is useful, (b) Medium term forecasting is useful,
(c) Long term forecasting is useful, (d) Forecasting is not useful.
Ans. (a)
16. In general, medium range forecasting period will be approximately:
(a) 5 to 10 Years, (b) 2 to 3 days,
(c) 3 to 6 months, (d) 10 to 20 years.
Ans. (c)
17. The range of Long range forecasting period may be approximately:
(a) 1 to 2 weeks, (b) 2 to 3 months,
(c) 1 year, (d) above 5 years.
Ans. (d)
18. To plan for future man power requirement:
(a) Short term forecasting is used,
(b) Long range forecasting is used,
(c) Medium range forecasting is used,

180 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 (d) There is no need to use forecasting, as future is uncertain.
Ans. (b)
19. Long range forecasting is useful in:
(a) Plan for Research and Development,
(b) To Schedule jobs in Job production,
(c) In purchasing the material to meet the present production demand,
(d) To assess manpower required in the coming month.
Ans. (a)
20. Medium range forecasting is useful in:
(a) To assess the loading capacity of the machine,
(b) To purchase a materials for next month,
(c) To plan for-capacity adjustments,
(d) To decide whether to receive production orders or not.
Ans. (c)
21. To decide work load for men and machines:
(a) Medium range forecasting is used,
(b) Short term forecasting is used,
(c) Long range forecasting is used,
(d) A combination of long range and medium range forecasting is used.
Ans. (b)
22. Important factor in forecasting production is:
(a) Environmental changes,
(b) Available capacity of machines,
(c) Disposable income of the consumer,
(d) Changes in the preference of the consumer.
Ans. (b)
23. Application of technology or process to the raw material to add use value is known as:
(a) Product, (b) Production,
(c) Application of technology, (d) Combination of technology and process.
Ans. (b)
24. In Production by disintegration the material undergoes:
(a) Change in economic value only,
(b) Change in physical and chemical characteristics,
(c) Change in technology only,
(d) None of the above.
Ans. (b)
25. In Production by service, the product undergoes the changes in:
(a) Shape and size of the surface, (b) Shape of the surface only,
(c) Size of the surface only, (d) Chemical and Mechanical properties.
Ans. (d)

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 181

 26. Use of any process or procedure designed to transform a set of input elements into a set of
output elements is known as:
(a) Transformation process, (b) Transformation of input to output,
(c) Production, (d) Technology change.
Ans. (c)
27. Conversion of inputs into outputs is known as:
(a) Application of technology, (b) Operations management,
(c) Manufacturing products, (d) Product.
Ans. (b)
28. The desired objective of Production and Operations Management is:
(a) Use cheap machinery to produce,
(b) To train unskilled workers to manufacture goods perfectly,
(c) Optimal utilisation of available resources,
(d) To earn good profits.
Ans. (c)
29. The scope of Production Planning and Control is:
(a) Limited to Production of products only,
(b) Limited to production of services only,
(c) Limited to production of services and products only,
(d) Unlimited, can be applied to any type of activity.
Ans. (d)
30. Manufacturing system often produces:
(a) Standardised products,
(b) Standardised products in large volumes,
(c) Substandard products in large volumes,
(d) Products and services in limited volume.
Ans. (a)
31. The difference between product system and project system is:
(a) Project system the equipment and machinery are fixed where as in product system they
are movable,
(b) In Product system the machinery and equipment are fixed and in project system they
are not fixed,
(c) Project system produces only standardized products and product system produces only
unstandardised products,
(d) Products cannot be stocked whereas projects can be stocked.
Ans. (b)
32. Most important benefit to the consumer from efficient production system is:
(a) He can save money,
(b) He will have product of his choice easily available,
(c) He gets increased use value in the product,

182 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 (d) He can get the product on credit.
Ans. (c)
33. Two important functions that are to be done by Production department are:
(a) Forecasting, (b) Costing,
(c) Scheduling and loading, (d) Inspecting.
Ans. (c)
34. Fixing the flow lines of materials in production is known as:
(a) Scheduling, (b) Loading,
(c) Planning, (d) Routing.
Ans. (d)
35. The act of releasing the production documents to the production department is known as:
(a) Planning, (b) Routing,
(c) Dispatching, (d) Releasing.
Ans. (c)
36. The activity of specifying when to start the job and when to end the job is known as:
(a) Plaining, (b) Scheduling,
(c) Timing, (d) Follow-up.
Ans. (b)
37. In an organisation the production planning and control department comes under:
(a) Planning department, (b) Manufacturing department,
(c) Personal department, (d) R & D department.
Ans. (b)
38. In Job production system, we need:
(a) More unskilled labours, (b) Skilled labours,
(c) Semi-skilled labours, (d) Old people.
Ans. (b)
39. In Continuous manufacturing system, we need:
(a) General purpose machines and Skilled labours,
(b) Special machine tools and highly skilled labours,
(c) Semi automatic machines and unskilled labours,
(d) General purpose machines and unskilled labours.
Ans. (b)
40. Most suitable layout for Job production is:
(a) Line layout, (b) Matrix layout,
(c) Process layout, (d) Product layout.
Ans. (c)
41. Most suitable layout for Continuous production is:
(a) Line layout, (b) Process Layout,
(c) Group technology, (d) Matrix layout.
Ans. (a)

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 183

 42. One of the product examples for Line layout is:
(a) Repair workshop, (b) Welding shop,
(c) Engineering College, (d) Cement.
Ans. (d)
43. The act of going round the production shop to note down the progress of work and feedback
the information is known as:
(a) Follow up, (b) Dispatching,
(c) Routing, (d) Trip card.
Ans. (a)
44. Line of Best fit is another name given to:
(a) Method of Least Squares, (b) Moving average method,
(c) Semi average method, (d) Trend line method.
Ans. (a)
45. One of the important basic objectives of Inventory management is:
(a) To calculate EOQ for all materials in the organisation,
(b) To go in person to the market and purchase the materials,
(c) To employ the available capital efficiently so as to yield maximum results,
(d) Once materials are issued to the departments, personally check how they are used.
Ans. (c)
46. The best way of improving the productivity of capital is:
(a) Purchase automatic machines,
(b) Effective Labour control,
(c) To use good financial management,
(d) Productivity of capital is to be increased through effective materials management.
Ans. (d)
47. MRP stands for:
(a) Material Requirement Planning,
(b) Material Reordering Planning,
(c) Material Requisition Procedure,
(d) Material Recording Procedure.
Ans. (a)
48. JIT stands for:
(a) Just in time purchase, (b) Just in time production,
(c) Just in time use of materials, (d) Just in time order the material.
Ans. (b)
49. The cycle time, selected in balancing a line must be:
(a) Must be greater than the smallest time element given in the problem,
(b) Must be less than the highest time element given in the problem,
(c) Must be slightly greater than the highest time element given in the problem,
(d) Left to the choice of the problem solver.
Ans. (c)
184 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
 50. The lead-time is the time:
(a) To placeholders for materials,
(b) Time of receiving materials,
(c) Time between receipt of material and using materials,
(d) Time between placing the order and receiving the materials.
Ans. (d)
51. Production planning deals with:
(a) What production facilities is required and how these facilities should be laid out in space
available,
(b) What to produce and when to produce and where to sell,
(c) What should be the demand for the product in future?
(d) What is the life of the product?
Ans. (a)
52. The first stage in production planning is:
(a) Process Planning, (b) Factory Planning,
(c) Operation Planning, (d) Layout planning.
Ans. (b)
53. In Process Planning we plan:
(a) Different machines required,
(b) Different operations required,
(c) We plan the flow of material in each department,
(d) We design the product.
Ans. (c)
54. In Operation Planning:
(a) The planner plans each operation to be done at work centers and the sequence of
operations,
(b) Decide the tools to be used to perform the operations,
(c) Decide the machine to be used to perform the operation,
(d) Decide the materials to be used to produce the product.
Ans. (a)
55. Before thinking of routing, the production planner has to:
(a) Decide the optimal allocation of available resources,
(b) To decide what type of labour to be used,
(c) To decide how much of material is required,
(d) To count how many orders he has on his hand.
Ans. (a)
56. The quantities for which the planner has to prepare production plan are known as:
(a) Optimal quantity of products, (b) Material planning,
(c) Quantity planning, (d) Planning quantity standards.
Ans. (d)

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 185

 57. The document, which is used to show planning quantity standards and production plan, is
known as:
(a) Planning specifications, (b) Route sheet,
(c) Bill of materials, (d) Operation sheet.
Ans. (a)
58. In route sheet or operation layout, one has to show:
(a) A list of Materials to be used,
(b) A list of machine tools to be used,
(c) Every work center and the operation to be done at that work center,
(d) The cost of product.
Ans. (c)
59. The cycle time in selected in balancing a line must be:
(a) Must be greater than the smallest time element given in the problem,
(b) Must be less than the highest time element given in the problem,
(c) Must be slightly greater than the highest time element given in the problem,
(d) Left to the choice of the problem solver.
Ans. (c)
60. In solving a problem on LOB, the number of workstations required is given by:
(a) Cycle time/Total time, (b) Cycle time/Element time,
(c) Total time/Element time, (d) Total time/ Cycle time.
Ans. (d)
61. (Total station time/Cycle time × Number of work stations) × 100 is know as:
(a) Line Efficiency, (b) Line smoothness,
(c) Balance delay of line, (d) Station efficiency.
Ans. (a)
62. Final stage of production planning, where production activities are coordinated and
projected on a time scale is known as:
(a) Scheduling, (b) Loading,
(c) Expediting, (d) Routing.
Ans. (a)
63. Scheduling shows:
(a) Total cost of production, (b) Total material cost,
(c) Which resource should do which job and when,
(d) The flow line of materials.
Ans. (c)
64. Scheduling deals with:
(a) Number of jobs to be done on a machine,
(b) Number of machine tools used to do a job,
(c) Different materials used in the product,
(d) Fixing up starting and finishing times of each operation in doing a job.
Ans. (d)
186 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
 65. The study of relationship between the load on hand and capacity of the work centers is
known as:
(a) Scheduling, (b) Loading,
(c) Routing, (d) Controlling.
Ans. (b)
66. One of the aims of loading is:
(a) To finish the job as early as possible,
(b) To minimise the material utilisation,
(c) To improve the quality of product,
(d) To keep operator idle time, material waiting time and ancillary machine time at
minimum.
Ans. (d)
67. One of the principles of Scheduling is:
(a) Principle of optimal product design, (b) Principle of selection of best material,
(c) Principle of optimal operation sequence, (d) Principle of optimal cost.
Ans. (c)
68. The method used in scheduling a project is:
(a) A schedule of breakdown of orders, (b) Outline Master Programme,
(c) PERT & CPM, (d) Schedule for large and integrated work.
Ans. (c)
69. Production planning in the intermediate range of time is termed as:
(a) Production planning, (b) Long range production planning,
(c) Scheduling, (d) Aggregate planning.
Ans. (d)
70. One of the requirements of Aggregate Planning is:
(a) Both output and sales should be expressed in a logical overall unit of measuring,
(b) Appropriate time period,
(c) List of all resources available,
(d) List of operations required.
Ans. (a)
71. In aggregate planning, one of the methods in modification of demand is:
(a) Differential Pricing, (b) Lay off of employees,
(c) Over time working, (d) Sub contracting.
Ans. (a)
72. In aggregate planning one of the methods used to modification of supply is:
(a) Advertising and sales promotion,
(b) Development of complimentary products,
(c) Backlogging,
(d) Hiring and lay off of employees depending on the situation.
Ans. (d)

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 187

 73. The first stage of Production control is:
(a) Dispatching, (b) Scheduling,
(c) Routing,
(d) Triggering of production operations and observing the progress and record the deviation.
Ans. (d)
74. The act of releasing the production documents to production department is known as:
(a) Routing, (b) Scheduling,
(c) Expediting, (d) Dispatching.
Ans. (d)
75. One of the important production documents is:
(a) Design sheet of the product, (b) List of materials,
(c) Route card, (d) Control chart.
Ans. (c)
76. One of the important charts used in Programme control is:
(a) Material chart, (b) Gantt chart,
(c) Route chart, (d) Inspection chart.
Ans. (b)
77. The way in which we can assess the efficiency of the production plant is by:
(a) Efficient dispatching,
(b) By manufacturing a good product,
(c) By comparing the actual performance with targets specified in the specified programme,
(d) By efficient production planning.
Ans. (c)
78. Production control concerned with:
(a) Passive assessment of plant performance,
(b) Strict control on labours,
(c) Good materials management,
(d) Good product design.
Ans. (a)
79. When work centers are used in optimal sequence to do the jobs, we can:
(a) Minimise the set up time, (b) Minimse operation time,
(c) Minimise the break down of machines, (d) Minimise the utility of facility.
Ans. (a)
80. The act of going round the production shop to note down the progress of work and feedback
the information is known as:
(a) Follow up, (b) Dispatching,
(c) Routing, (d) Trip card.
Ans. (a)
81. One of the activities of expediting is:
(a) To file the orders in sequence,
(b) To decide the sequence of operation,
188 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)
 (c) To record the actual production against the scheduled production,
(d) To examine the tools used in production.
Ans. (c)
82. ‘Z’ chart is a chart used in:
(a) Programme control, (b) Job control,
(c) Cost control, (d) Quality control.
Ans. (a)
83. Z-chart can be used to show:
(a) Process used in production, (b) Quality level of the product,
(c) Both the plan and the performance, and deviation from the plan,
(d) To show cost structure of the product.
Ans. (c)
84. Computers are used in Production control in this area:
(a) Follow-up activity,
(b) To control labour,
(c) To disseminate information,
(d) Loading, Scheduling and Assignment works.
Ans. (d)

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 189

 Other Types - Question & Answer
1. Match the product in Column I with the production centre/equipment/plant in Column II.

I II
A. Furniture i. Assembly line
B. Hydro-electricity ii. Refinery
C. Television set iii. Carpentry
D. Cement iv. Turbo-Alternator
E. Aviation Fuel v. Rotary Kiln
F. Tools vi. Machine shop

Answer: Matching:

I II
A. Furniture iii. Carpentry
B. Hydro-electricity iv. Turbo-Alternator
C. Television set i. Assembly line
D. Cement v. Rotary Kiln
E. Aviation Fuel ii. Refinery
F. Tools vi. Machine shop

2. Match the terms shown under ‘X’ with their relevant terms; shown under ‘Y’.

X Y
a. Ranking Method 1. Method Study
b. Motion Economy 2. Plant Layout
c. Work Sampling 3. Job Evaluation
d. Normal Curve 4. Inventory Control
e. Use of Templates 5. Statistical Quality Control
f. Crashing 6. Network Analysis
g. Replacement 7. Value Analysis
h. Brainstorming 8. Work Measurement
i. Stock Level 9. Maintenance

Answer: Matching:

X Y
a. Ranking Method 3. Job Evaluation
b. Motion Economy 1. Method Study
c. Work Sampling 8. Work Measurement

190 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 d. Normal Curve 5. Statistical Quality Control
e. Use of Templates 2. Plant Layout
f. Crashing 6. Network Analysis
g. Replacement 9. Maintenance
h. Brainstorming 7. Value Analysis
i. Stock Level 4. Inventory Control

3. Match the products in Column I with the production centers in Column II.

I II
(A) Electricity (a) Blast Furnace
(B) Petrol (b) Generator
(C) Iron (c) Refinery
(D) Cloth (d) Assembly Line
(E) Car (e) Smithy
(F) Cotton Yarn (f) Spinning Mill
(G) Forgings (g) Power Loom

Answer: Matching:

I II
(A) Electricity (b) Generator
(B) Petrol (c) Refinery
(C) Iron (a) Blast Furnace
(D) Cloth (g) Power Loom
(E) Car (d) Assembly Line
(F) Cotton Yarn (f) Spinning Mill
(J) Forgings (e) Smithy

4. State whether the following statements are TRUE or FALSE.

(i) Method Study should precede Work Measurement.
(ii) Merit Rating is used to determine the cost of a product.
(iii) Production planning is an essential function in a factory.
(iv) Training boosts employee morale.
(v) A good Materials Handling system always consists of conveyors.
(vi) Increased productivity leads to cost reduction.
(vii) Project costs increase as the duration of the project increases.
(viii) When demand does not exist in the market, we should start Production Incentives.
(ix) A work stoppage generally reduces the cost of production.
(x) No handling is the best handling.
(xi) It is desirable to conduct work measurement after Method study.
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 191
 (xii) Job Evaluation is used to measure absolute job worth.
(xiii) Incentive scheme is introduced by Management with a view to reduce direct labour cost.
(xiv) The increase in productivity can be attributed to the application of Industrial Engineering/
Techniques, particularly the work study.
(xv) Operation process chart incorporates all five symbols.
(xvi) Multiple Activity chart deals with layout problems.
(xvii) Standard performance is the natural rate of working of an average operator when he
works tinder proper supervision but without any financial motivation.
(xviii) Allowances for non-availability of materials power failure and breakdown of machines
are provided for in the standard time for an operation/job.
(xix) In carrying-out Job Evaluation studies, point system is the best method.
(xx) It is justified to consider the effect of working condition both in Work Measurement and
Job-Evaluation.
(xxi) Increase in productivity leads to retrenchment of work force.
(xxii) In view of rapid technological advancement we would not concentrate on labour
productivity.
(xxiii) Piece wage system is a substitute for proper supervision.
(xxiv) Personnel Manager has nothing to do with productivity. It is the job of Technical Personnel.
(xxv) Ranking is one of the Job Evaluation Techniques.
(xxvi) Results available from work sampling study is not 100% accurate.
(xxvii) Since breakdown of Plant and machineries is a random phenomenon, it is impossible to
do any work measurement in Maintenance Area.
(xxviii) Job Evaluation does not help in performance Rating i. There is no difference between
Method study and Value Engineering.
(xxix) Two-handed process chart is the most suitable Recording Technique in Electronics
Assembly Industry.
Answer:
(i) True (ii) False (iii) True (iv) True (v) False
(vi) True (vii) True (viii) False (ix) False (x) True
(xi) True (xii) False (xiii) False (xiv) True (xv) True
(xvi) False (xvii) False (xviii) False (xix) True (xx) True
(xxi) False (xxii) False (xxiii) False (xxiv) False (xxv) True
(xxvi) True (xxvii) False (xxviii) False (xxix) False.

5. Answer the following Queries:

(i) Do standard Times allow for relaxation of the Operators?
(ii) Is a lift same as an elevator?
(iii) Is the use of metric system of weights and measures compulsory in India?
(iv) Can the shaping machine be considered a versatile machine tool?
(v) Does the Factories Act in India allow the employment of women in all industries?
(vi) Is Break-even analysis a management tool?

192 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 (vii) Is Activity Sampling a technique of Job Evaluation?
Answer:
(i) Yes (ii) Yes (iii) Yes (iv) No
(v) N o (vi) Yes (vii) No

6. G
 iven below are two lists—list ‘A’ containing 11 abbreviations and list ‘B’ containing various
functional areas associated with production management. Expand the abbreviations and
match them with the corresponding functional areas.

List ‘A’ List ‘B’

LP Capacity planning
PERT Quality control
MTM Project funding
VA Project viability checking
SRAC Inventory management
MRP Product design
CBA Cost control
CAD Product mix determination
IFCI Project planning
AOQ Work measurement

Answer:
List ‘A’ Expansion Matching with List ‘B’
LP Linear Programming Product mix determination
PERT Programme Evaluation and Review Technique Project planning
MTM Methods Time measurement Work measurement
VA Value Analysis Cost control
SRAC Short Run Average Cost Capacity planning
MRP Materials Requirement Planning Inventory management
CBA Cost Benefit Analysis Project viability checking
CAD Computer Aided Design Product design
IFCI Industrial Finance Corporation of India Project funding
AOQ Average outgoing Quality Quality control

7. Choose the word or phrase which would be appropriate to fill up the blanks in each statement:
(i) Statistical analysis is used to determine the optimum policy of .................... maintenance.
(ii) Watch and ward personnel are responsible for .................... aspects in a factory.
(iii) G eneral purpose machine are less prone to .................... .
(iv) T he pattern shop in a factory should ideally be near the .................... .
(v) Factor Comparison is a method of .................... .
AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 193
 (vi) Taylor originated the idea of .................... relationships in an organisation.
(vii) .................... cannot be delegated.
(viii) Ergonomics is another name for .................... .
(x) Gantt chart is used for .................... control.
Answer:
(i) preventive (ii) security
(iii) obsolescence (iv) foundry
(v) job evaluation (vi) functional
(vii) responsibility (viii) human engineering
(ix) product (x) production

8. Match the terms in Column I with the relevant terms in Column II.

Column I Column II
(A) Inventory Control (i) Turbo-Alternator
(B) Network Analysis (ii) Crashing
(C) Aviation Fuel (iii) Value Analysis
(D) Hydro-electricity (iv) Stock Level
(E) Improvement in productivity (v) Refinery

Answer:
(A) – (iv); (B) – (ii); (C) – (v); (D) – (i); (E) – (iii).

9. F or each part below, choose the most appropriate answer out of the four options given against
each part:
(i) T he following establishes time sequence of operations:
(A)  Routing, (B) Sequencing,
(C)  Scheduling, (D) Dispatching.

(ii) Arrangement of machines depending on sequence of operations happens in:

(A)  Process Layout, (B) Product Layout,
(C)  Hybrid Layout, (D) Group Technology Layout.

(iii) Linear Programming is a technique used for determining:

(A)  Production Programme, (B) Plant Layout,
(C)  Product Mix, (D) Manufacturing sequence.
Answer:
(i) (C) Scheduling,
(ii) (B) Product Layout,
(iii) (C) Product Mix.

194 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

10. F or each part below, choose the most appropriate answer out of the four options given against
each part.
(i) Issuing necessary orders, and taking necessary steps to ensure that the time targets set
in the schedules are are effectively achieved is known as:
A. Routing, B. Dispatching,
C. Scheduling, D. Inspection.
(ii) Preventive maintenance is useful in reducing:
A. Inspection Cost, B. Shutdown Cost,
C. Cost of premature replacement, D. Set-up cost of machine
Answer:
(i) (B) Dispatching - Dispatching is one of the important production control functions.
(ii) (B) Shutdown Cost - P reventive maintenance tries to minimize the problems of
breakdown maintenance. It locates weak parts in all equipments,
provide them regular inspection and minor repairs thereby reducing
the breakdowns.

11. Examine each statement and indicate whether it is ‘True’ or ‘False’ :

(i) Project cost increases as the duration of the project increases.
(ii) With increase in lot size the setup cost per unit decreases, whereas the inventory carrying
cost increases.
(iii) If the total float value is zero, it means the resources are just sufficient to complete the
activity without delay.
Answer:
(i) Project cost increases as the duration of the project increases. –True
One of the feature of project is, it has defined start and end dates. If project’s duration
time increases, the cost also increases.
(ii) With increase in lot size the setup cost per unit decreases, whereas the inventory carrying
cost increases. – True.
Because, the size and carrying cost are directly related. If size increases the carrying cost
also increased.
(iii) If the total float value is zero, it means the resources are just sufficient to complete the
activity without any delay. – True
If the total float value is negative, it denotes that the resources are not adequate to
finish in time. Again, if total float value is Positive, It denotes that resources are in excess
or the resources should be reallocated to avoid the delay, otherwise the activity will be
delayed by so much of time. If total float value is zero, it means the resources are just
sufficient to complete the activity without any delay.

12. F or each part below, choose the most appropriate answer out of the four options given against
each part:
(i) One of the important charts used in Programme control is:
(A) Material chart, (B) Gantt chart,
(C) Route chart, (D) Inspection chart.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 195

 (ii) Generally the size of the order for production in Job production is:
(A) Small, (B) Large,
(C) Medium, (D) Very large.
Answer:
(i) (B) Gantt Chart,
(ii) (A) Small.

13. P ut an appropriate word in blank position :

(i) .................... focuses on such areas as inventory goals and wages budgets.
(ii) IBFS is optimal and unique when all numbers in the .................... are non-negative.
(iii) The investment on machines in a straight line layout is .................... than the investment
on machines in a functional layout.
Answer:
(i) Short-range planning
(ii) Net Evaluation Table
(iii) Higher

14. Examine each statement and indicate whether it is ‘True’ or ‘False’.

(i) A special purpose Machine Tool performs only a limited number of specialised operations
with great speed and precision.
(ii) Strikes and lock-out are controllable factors affecting Capacity Planning.
(iii) Incentives are substitute for lower wages.
(iv) Linear Programming does not consider uncertainties
(v) Depending on the need, the maintenance activity may be centralized or decentralized.
Answer:
(i) TRUE (ii) FALSE
(iii) FALSE (iv) TRUE
(v) TRUE

15. F or each part below, choose the most appropriate answer out of the four options given against
each part:
(i) One of the product examples for Line Layout is :
(A) Repair Workshop, (B) Welding shop,
(C) Engineering College, (D) Cement.
(ii) The card which is prepared by the dispatching department to book the labour involved
in each operation is :
(A) Labour card, (B) Wage card,
(C) Credit card, (D) Job card.
(iii) Cost reduction can be achieved through :
(A) Work sampling, (B) Value analysis,
(C) Quality assurance, (D) Supply chain management.

196 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)

 (iv) Addition of value to raw materials through application of technology is :
(A) Product, (B) Production,
(C) Advancement, (D) Transformation.
Answer:
(i) (D) Cement — Line layout is suitable in plants manufacturing standardised products on
mass scale like cement, paper, chemical etc.
(ii) (D) Job card — A job card gives detail of job to be performed in a production facility.
(iii) (B) Value analysis — It is systematic analysis that identifies and selects best alternatives
for designs, materials, processes & systems.
(iv) (B) Production — It is the act of manufacturing goods.

16. Put an appropriate word or two in blank position:

(a) To evaluate the work done by preventive maintenance, .................... is derived at from
the total time of stoppage of the machine for scheduled and unscheduled maintenance
work.
(b) In linear programming, the word ‘linear’ establishes certain relationships among
different .................... .
Answer:
(a) Down time (b) Variables

17. Examine each statement and indicate whether it is True or False:

(i) In general, long-range forecasting is more useful in production planning.
(ii) A work stoppage generally reduces the cost of production.
Answer:
(i) In general, long-range forecasting is more useful in production planning — False
(ii) A work stoppage generally reduces the cost of production.
Reason: Work stoppage does not reduce the cost of production — False

18. Put an appropriate word or two in blank position.

(i) .................... is the interval between placing an order for a particular item and its actual
receipt.
(ii) Product is a combination of potential utilities for a .....................
(iii) A jig contains a device for guiding the ………………...
Answer:
(i) Lead time.
(ii) Consumer.
(iii) Tools.

19. Examine each statement and indicate whether it is ‘True’ or ‘False’:

(i) There is a limit beyond which labour productivity cannot be improved.
(ii) When demand does not exist in the market, we should start Production Incentives.

AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI) 197

 (iii) Breakdown maintenance doesn’t require use of standby machines.
Answer:
(i) TRUE     (ii) FALSE     (iii) FALSE

20. Put an appropriate word in blank position:

(i) Machines are purchased or replaced to ………………... the productive capacity.
(ii) ………………... can be determined using the Northwest Corner Rule.
(iii) A ………………... is an appliance which holds the work when it is machined.
Answer:
(i) Increase     (ii) IBFS     (iii) Fixture

21. Choose the most correct alternative:

(i) (Total station time/cycle time × Number of work stations) × 100 is known as
(A) Line efficiency (B) Line smoothness\
(C) Balance delay of line (D) Station efficiency
(ii) The most powerful and popular method for solving linear programming problem is
(A) Simplex method (B) Graphical method
(C) Transportation method (D) Assignment method
(iii) Most suitable layout for continuous production is
(A) Line layout (B) Process layout
(C) Group technology (D) Matrix layout
Answer:
(i) (A) Line efficiency (ii) (A) S implex method
(iii) (A) Line layout

22. Put an appropriate word in blank position:

(i) ………………... systems replace human beings to read data from products and documents
and interpret the data.
(ii) The user’s expectation method of ………………... provides a subjective feel of the market.
(iii) ………………... control is typically found wherever a particular bottleneck machine exist in
the process of manufacturing.
(iv) General purpose machines are less prone to ………………....
Answer:
(i) Barcode (ii) Sales forecasting
(iii) Load (iv) Obsolescence

23. (i) Activity Sampling is not a technique of Job Evaluation.

(ii) A good plant layout is one of the factors in effective utilization of labour.
Answer:
(i) True (ii) True

198 AMARENDRA KUMAR ( M.Sc. M.PHIL Visiting faculty of ICSI)