Production & Operations

Management

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** Operations Management: Concept, Functions, and Key Contributions

## Concept of Operations Management :- Operations Management (OM) refers to the

administration of business practices to create the highest level of efficiency possible within
an organization. It involves designing, managing, and improving production processes to
deliver goods and services efficiently.

## Functions of Operations Management :- Operations management covers various functions

to ensure smooth business processes, including:
• Planning: Forecasting demand, resource allocation, and capacity planning.
• Organizing: Structuring teams, workflows, and production schedules.
• Staffing: Hiring and training employees for operational efficiency.
• Directing: Leading and supervising operations activities.
• Controlling: Monitoring performance, ensuring quality, and implementing corrective
actions.

## Transformation Process Model :- The Transformation Process Model explains how inputs
are converted into outputs through various processes.
• Inputs: Includes raw materials, labor, capital, and technology.
• Process: The activities involved in transforming inputs into finished products or services,
such as manufacturing, assembling, and quality control.
• Outputs: Finished goods and services delivered to customers.

## Classification of Operations :- Operations can be classified into different categories

based on the type of production and service:
• Manufacturing Operations: Producing physical goods (e.g., automobiles, electronics).
• Service Operations: Delivering intangible services (e.g., banking, healthcare).
• Project-Based Operations: Temporary activities for unique outputs (e.g., construction,
software development).
• Continuous vs. Intermittent Operations: Continuous operations involve constant
production (e.g., oil refineries), whereas intermittent operations involve batch processing
(e.g., customized furniture manufacturing).

5. Responsibilities of an Operations Manager :- An operations manager is responsible for:

• Process Design and Improvement: Optimizing workflows and reducing waste.
• Quality Management: Ensuring high product/service standards.
• Supply Chain Management: Coordinating suppliers and logistics.
• Inventory and Resource Management: Managing materials and workforce efficiently.
• Technology Implementation: Adopting automation and innovative techniques.
• Cost Control and Efficiency: Reducing operational expenses and maximizing output.

## Contributions of Key Thinkers in Operations Management

1) Henry Ford (1863-1947) :-

• Introduced mass production and the assembly line in automobile manufacturing.
• Developed the Ford Production System, reducing costs and increasing efficiency.
• Revolutionized industrial operations by standardizing processes.

2) W. Edwards Deming (1900-1993)

• Introduced Total Quality Management (TQM) and Statistical Process Control (SPC).
• Emphasized continuous improvement and reducing process variability.
• Helped Japan’s manufacturing sector achieve world-class quality after World War II.

3) Philip B. Crosby (1926-2001)

• Developed the Zero Defects Concept, promoting the idea that quality is free.
• Advocated prevention over inspection, reducing defects at the source.
• Introduced four absolutes of quality management, focusing on customer satisfaction.

4) Genichi Taguchi (1924-2012)

• Developed the Taguchi Method, which focuses on robust product design.
• Introduced the Loss Function, measuring the cost of deviation from quality targets.
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• Emphasized reducing variation in production to improve quality and performance.
** Facility Location :- Facility location refers to selecting the best location for manufacturing plants,
warehouses, or service centers. It plays a crucial role in cost efficiency, customer service, and overall
business success.

## Key importance includes:

• Cost Reduction: Lower transportation, labor, and operational costs.
• Customer Proximity: Faster delivery and better customer service.
• Supply Chain Efficiency: Optimized raw material procurement and distribution.
• Legal and Political Stability: Ensuring smooth business operations.
• Scalability: Allowing future expansion and growth.

## Factors in Location Analysis :-

• Economic Factors: Labor cost, land cost, transportation cost, and tax incentives.
• Proximity to Markets & Suppliers: Reducing logistics and lead time.
• Infrastructure Availability: Roads, power, water, and telecommunication.
• Government Policies: Incentives, taxes, and legal regulations.
• Environmental & Social Factors: Climate, community development, and labor availability.

## Location Analysis Techniques :-

• Factor Rating Method: Assigning weights to key factors and evaluating locations based on scores.
• Cost-Profit Analysis: Comparing cost and revenue potential across different locations.
• Center of Gravity Method: Finding a location that minimizes transportation costs.
• Break-even Analysis: Determining location profitability based on fixed and variable costs

.** Product Design and Development

## Product Design and Its Characteristics :- Product design is the process of defining the appearance,
functionality, and manufacturability of a product. Characteristics include:
• Functionality: Solving customer problems efficiently.
• Aesthetics: Appealing design for user attraction.
• Reliability: Ensuring long-term performance.
• Sustainability: Environmentally friendly design.
• Manufacturability: Ease of production and cost-effectiveness.

## Product Development Process (Technical) :-

1. Idea Generation – Brainstorming and market research.
2. Feasibility Study – Checking technical and financial viability.
3. Design & Prototyping – Creating models and testing
4. Testing & Validation – Ensuring quality and safety.
5. Production & Launch – Mass manufacturing and marketing.

## Product Development Techniques :-

• CAD (Computer-Aided Design): Creating detailed digital product models.
• Value Engineering: Optimizing product cost without affecting quality.
• Reverse Engineering: Studying competitor products to improve designs.
• Quality Function Deployment (QFD): Aligning customer needs with product features.

** Process Selection and Production Systems

## Process selection :- Process selection is the process of deciding how to organize the production of
goods or services. It can also refer to the process of identifying and selecting qualified people to fill
vacancies in a company.
* Process selection in operations management :-
• In operations management, process selection is a key part of how an organization converts inputs
into outputs.
It affects the entire organization and its ability to achieve its mission.
• Factors like volume, variety, and flexibility determine which type of process is suitable.

## Types of Production Systems

1. Project Production – Large-scale, one-time tasks (e.g., bridge construction).
2. Job Production – Customized, small-scale production (e.g., handmade jewelry).
3. Batch Production – Producing in batches for efficiency (e.g., bakery products).
4. Mass Production – Large-scale, continuous production of identical products (e.g., automobiles).
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5. Process Production – Continuous flow for liquids or gases (e.g., petroleum refining).
 ## Operation management in corporate profitability and competitiveness :- Operations management
(OM) plays a pivotal role in driving corporate profitability and competitiveness. Here's a breakdown of
how it achieves this:

Key Impacts of Operations Management:

1) Cost Reduction: :- OM focuses on optimizing processes, eliminating waste, and improving efficiency.
This leads to lower production costs, reduced inventory holding costs, and minimized operational
expenses.
2) Enhanced Productivity: - OM techniques, such as process analysis and work design, help maximize
output with minimal input.
3) Improved Quality: OM emphasizes quality control and assurance, ensuring that products and
services meet customer expectations. Higher quality reduces defects, returns, and warranty costs,
while enhancing customer satisfaction and loyalty.
4) Increased Customer Satisfaction: Efficient operations lead to timely delivery, reliable products, and
responsive customer service.Satisfied customers are more likely to make repeat purchases and
recommend the company to others.
5) Competitive Advantage: By optimizing costs, quality, and delivery, OM enables companies to offer
superior value to customers. Flexibility and agility in operations allow companies to adapt quickly to
changing market demands and competitive pressures.
6) Strategic Alignment: Operations management helps to align the operational goals of a company with
the overall strategic goals of that company. Thus making sure all parts of the company are working
towards the same end goals.

Unit-II: Operations Management - ** Facility Layout

## Objectives of Facility Layout :- Facility layout refers to the physical arrangement of resources,
equipment, and workstations in a production or service facility.

Its main objectives are:

• Efficient Workflow: Minimizing material handling and movement.
• Space Utilization: Maximizing productivity in available space.
• Improved Safety: Ensuring a safe working environment.
• Flexibility: Adapting to future changes and expansions.
• Better Supervision: Enhancing monitoring and quality control.

## Advantages of an Effective Facility Layout :-

• Reduced Production Cost: Optimized workflow minimizes delays.
• Higher Productivity: Smooth operations increase output.
• Better Employee Morale: Well-planned layouts improve working conditions.
• Faster Delivery Time: Efficient layouts lead to quicker processing.

## Basic Types of Layouts :-

1. Process Layout (Functional Layout) - Groups similar machines together (e.g., hospitals, workshops).
• Advantage: High flexibility for customization.
• Disadvantage: Higher material handling costs..

2. Product Layout (Line Layout) - Machines arranged sequentially for mass production (e.g., automobile
assembly).
• Advantage: High efficiency for large volumes.
• Disadvantage: Less flexibility for design changes.

3. Fixed Position Layout - Product remains stationary while workers and machines move around it (e.g.,
shipbuilding, construction).
• Advantage: Suitable for large, complex products.
• Disadvantage: High movement cost for resources.

4. Cellular Layout - Combines process and product layouts for efficiency (e.g., modular manufacturing).
• Advantage: Reduced material movement and setup time.
• Disadvantage: High initial cost.

5. Hybrid Layout - A combination of different layout types to maximize benefits.

## Problems in Facility Layout :-

• Poor Space Utilization: Leads to congestion or underutilization.
• Long Material Movement: Increases time and cost.
• Unbalanced Workloads: Causes bottlenecks in production. 4
• Lack of Flexibility: Difficulties in modifying layouts as per demand changes.
## Marketing Planning Process :- The marketing planning process is a structured
approach to developing and implementing marketing strategies. It involves the following
steps:

Step 1: Situation Analysis (Where are we now?)

* SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats).
* PESTEL Analysis (Political, Economic, Social, Technological, Environmental, and Legal
factors).
* Competitor Analysis (Identifying market rivals and their strategies).
Customer Analysis (Understanding target market needs and preferences).

Step 2: Setting Marketing Objectives (Where do we want to go?)

* Objectives should be SMART (Specific, Measurable, Achievable, Relevant, and Time-
bound).
Example: Increase online sales by 20% in the next 12 months.

Step 3: Developing Marketing Strategies (How will we get there?) - Segmentation,

Targeting, and Positioning (STP):
* Segmentation: Dividing the market into customer groups.
* Targeting: Selecting the most profitable segments.
* Positioning: Creating a unique brand identity in customers' minds.
* Marketing Mix (4Ps Strategy) -
• Prroduct Strategy: Designing products based on customer needs.
• Price Strategy: Competitive pricing for market penetration or skimming.
• Place (Distribution) Strategy: Selecting the best distribution channels.
• Promotion Strategy: Advertising, sales promotions, and digital marketing.

Step 4: Implementing the Marketing Plan (Executing the strategy)

* Allocating resources (budget, team, and technology).
* Launching marketing campaigns through various channels (online, offline, social media,
etc.).
* Coordinating with sales and distribution teams.

Step 5: Monitoring and Controlling Performance (Measuring success) - Using Key

Performance Indicators (KPIs) such as:
* Sales growth
* Customer retention rate
* Market share increase
* Return on Investment (ROI) on marketing campaigns
* Making necessary adjustments based on performance data.

## Importance of the Marketing Planning Process :-

* Helps businesses stay competitive by adapting to market changes.
* Ensures efficient resource allocation and avoids wastage.
* Strengthens customer relationships through targeted marketing efforts.
* Provides clear direction for marketing teams and aligns efforts with business goals.

** Marketing Information System (MIS) and Consumer Behaviour -

## Concept of Marketing Information System :- A Marketing Information System (MIS) is

a structured framework that collects, analyzes, and distributes relevant data to
marketing managers for decision-making. It helps businesses understand market trends,
customer behavior, and competitive landscapes, enabling them to make informed
strategic choices.
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** Production Planning & Control (PPC)

## Concepts of PPC :- Production Planning & Control (PPC) ensures that production processes are
organized and aligned with business goals to meet customer demands efficiently.

## Objectives of PPC :-
• Optimal Resource Utilization: Reducing wastage.
• Timely Production: Ensuring on-time delivery.
• Quality Control: Maintaining consistency.
• Cost Minimization: Controlling production expenses.

## Functions of PPC :-
1. Planning: Forecasting demand and scheduling production.
2. Routing: Determining the best sequence of operations.
3. Scheduling: Setting timelines for different production activities
4. Dispatching: Assigning tasks to workers and machines.
5. Monitoring & Control: Tracking progress and making adjustments.

## Work Study in Productivity Improvement :- Work study is a systematic, objective examination of all
the factors that govern the efficiency of specified activities. It's essentially about boosting productivity
by optimizing how work is done. It breaks down into two core components: method study and work
measurement. Here's a closer look:

1) Method Study:
* Purpose:
• Method study focuses on improving the way work is done. It aims to simplify processes, eliminate
unnecessary movements, and find the most efficient and safe way to perform a task.
• It's about "how" the work is performed.

* Key Aspects:
• Analysis: It involves a detailed analysis of existing work methods.
• Improvement: It seeks to develop and implement improved methods that are more effective and
efficient.

* Objectives:
• Reduce costs. • Improve product quality. • Enhance workplace safety. • Increase efficiency. • Reduce
worker fatique.

* Process:
• Selecting the work to be studied.
• Recording all relevant facts about the present method.
• Examining those facts critically.
• Developing the most practical, economical, and effective method.
• Installing that method.
• Maintaining the new method.

2) Work Measurement:
* Purpose:
• Work measurement is about determining the time it should take a qualified worker to complete a
specific task at a defined level of performance.
• It's about "how long" the work takes.

* Key Aspects:
• Quantification: It involves quantifying the time required to perform a task.
• Standardization: It helps establish standard times for various tasks.

* Objectives:
• Determine standard times for tasks.
Aid in production planning and control.
• Provide a basis for performance evaluation.
• Assist in cost estimation.

* Techniques:
• Time study: Directly observing and recording the time taken to perform a task.
• Work sampling: Observing a task at random intervals to determine the proportion of time spent on
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different activities.
• Predetermined motion time systems: using pre established times for basic human motions.
Unit –II

## Market Segmentation & Targeting :- ## Market Segmentation & Targeting - Market

segmentation is the process of dividing a broad consumer or business market into smaller
groups of customers with similar needs, characteristics, or behaviors. This allows businesses
to tailor their marketing strategies more effectively.

1. Product Differentiation - Product differentiation refers to the process of distinguishing a

product or service from competitors by emphasizing unique attributes, quality, features, or
benefits. It helps businesses create a competitive edge in the market.
* Types of Differentiation: Features, Design, Quality, Customer Service, Brand Image, etc.
* Example: Apple differentiates its products with premium design, ecosystem integration, and
innovation.

2. Positioning for Competitive Advantage - Positioning is the strategy used to create a distinct
image of a product in the minds of consumers compared to competitors. A strong positioning
strategy enhances customer perception and loyalty.

Key Positioning Strategies:

* Cost Leadership (offering lower prices)
* Differentiation (unique product features)
* Focus Strategy (targeting a niche market)
Example: Volvo positions itself as the safest car brand.

## Product Decisions - Product decisions involve planning and managing a company’s

product portfolio to ensure it meets customer demands and supports business growth.

1. Product Mix - A product mix refers to the total set of products a company offers. It
includes:
* Width: Number of product categories (e.g., Apple sells smartphones, tablets, laptops).
* Length: Total number of products across all categories.
* Depth: Variants of a product within a category (e.g., iPhone 13, iPhone 14, iPhone 15).
* Consistency: The degree to which different product lines are related.

2. Packaging and Labeling Decisions

* Packaging: The design and material of product packaging that influences customer
attraction and protection.
* Labeling: Includes information about the product, usage, ingredients, and legal
requirements.
* Importance : Affects consumer buying decisions, brand recognition, and legal compliance

##Branding & Brand Equity

1. Branding - Branding is the process of creating a unique identity for a product through a
name, logo, design, and marketing strategy. Strong branding builds customer trust and
loyalty.

2. Brand Value - Brand value refers to the monetary worth of a brand based on its reputation,
customer perception, and financial performance.

3. Brand Equity - Brand equity is the intangible value of a brand based on customer
recognition, perception, and loyalty. It consists of:
* Brand Awareness (how well customers recognize the brand).
* Brand Associations (emotions and ideas linked to the brand).
* Perceived Quality (customer perception of brand quality).
* Brand Loyalty (repeat purchases and customer commitment).

Example: Coca-Cola has high brand equity due to its global recognition, customer trust, and
strong market presence.

By focusing on segmentation, differentiation, positioning, and brand management,

companies can effectively target customers and establish a strong market presence.: 7
** New Product Development (NPD) - New Product Development is the process of bringing a
new product to the market, from idea generation to commercialization..

It involves several stages:

1. Idea Generation – Collecting innovative ideas from various sources (customers, competitors,
employees, etc.).
2. Idea Screening – Evaluating and selecting the best ideas based on feasibility and market
potential.
3. Concept Development & Testing – Creating a prototype and testing it with target
consumers.
4. Business Analysis – Assessing profitability, costs, and market demand.
5. Product Development – Engineering and designing the final product.
6. Test Marketing – Introducing the product in a small market to analyze customer response.
7. Commercialization – Full-scale product launch with marketing and distribution strategies.

Example: Apple follows a structured NPD process for launching new iPhones with enhanced
features every year.

** New Product Development (NPD) - New Product Development is the process of bringing a
new product to the market, from idea generation to commercialization..

It involves several stages:

1. Idea Generation – Collecting innovative ideas from various sources (customers, competitors,
employees, etc.).
2. Idea Screening – Evaluating and selecting the best ideas based on feasibility and market
potential.
3. Concept Development & Testing – Creating a prototype and testing it with target
consumers.
4. Business Analysis – Assessing profitability, costs, and market demand.
5. Product Development – Engineering and designing the final product.
6. Test Marketing – Introducing the product in a small market to analyze customer response.
7. Commercialization – Full-scale product launch with marketing and distribution strategies.

Example: Apple follows a structured NPD process for launching new iPhones with enhanced
features every year.

## Marketing Mix Strategies for PLC::-

* Introduction: High promotion, penetration pricing.
* Growth: Competitive pricing, wider distribution.
* Maturity: Product enhancements, advertising.
* Decline: Cost-cutting, minimal marketing.

** Services Marketing and 7Ps Framework - Services marketing refers to promoting intangible
products (e.g., banking, education, healthcare). Unlike physical products, services are
intangible, perishable, variable, and inseparable from providers.

## The 7Ps of Services Marketing:

1. Product – The service being offered (e.g., hotel stay, online course).
2. Price – Pricing strategies (e.g., premium, penetration)
3. Place – Service delivery channels (e.g., online platforms, physical stores).
4. Promotion – Advertising, social media, referrals.
5. People – Employees and customer service.
6. Process – Service delivery steps (e.g., ATM withdrawals, food ordering apps).
7. Physical Evidence – Tangible elements supporting the service (e.g., ambiance of a
restaurant, website design).

Example: Amazon Prime provides seamless service through digital platforms, fast delivery, and
excellent customer support.

These concepts help businesses develop effective strategies for launching, marketing, and
managing both products and services efficiently. 8
** Capacity Planning :-

## Concepts of Capacity Planning :- Capacity planning ensures that a business can meet future
demand by optimizing resources. It involves determining the production capacity needed to meet
customer demand.Capacity planning is the process of determining the resources required to meet
demand. It's used to ensure that a business has the right resources available when needed.

## Factors Affecting Capacity Planning :-

1. Market Demand: Future sales forecasts.
2. Technology: Upgrades and automation.
3. Labor Skills: Availability and training.
4. Supply Chain: Raw material availability.
5. Economic Conditions: Inflation, interest rates.

## Capacity Planning Decisions :-

1) Long-Term: Expanding facilities, investing in new technologies.
2) Medium-Term: Hiring additional workers, adjusting production schedules.
3) Short-Term: Managing workforce shifts, optimizing existing capacity.
Effective capacity planning ensures higher efficiency, reduced Layout, aLayouts eased
competitiveness.

## How does capacity planning work?

• Foreecast demand: Use data to predict future demand or trends
• Analyze current capacity: Determine the production capabilities of current resources
• Plan for the future: Determine the resources needed to meet future demand
• Adjust capacity: Adjust capacity to match demand

.## Capacity planning strategies

•Laga strategy: Maintain enough resources to meet current demand
• Lead strategy: Anticipate future demand and increase production capacity
• Match strategy: Adjust capacity to match demand
• Benefits of capacity planning
• Helps companies determine if they can take on new projects
• Helps companies avoid overinflating resources or causing client churn
• Helps companies determine how to offer services, and the staff and time frames required to meet
demand
• Helps companies ensure smooth and efficient operations.

UNIT - III

## Quality Management
* Introduction: Quality management is a comprehensive approach to long-term success through
customer satisfaction. It involves all members of an organization participating in improving
processes, products, services, and the culture they work in.
* Meaning: Quality management is the act of overseeing all activities and tasks needed to maintain a
desired level of excellence. This includes determining a quality policy, creating and implementing
quality planning and assurance, and quality control and quality improvement.

## Quality Characteristics of Goods and Services

1) Goods:
* Performance: Primary operating characteristics of a product.
* Features: Secondary characteristics that supplement basic functioning.
* Reliability: Probability of a product not failing within a specified period.
* Conformance: Degree to which a product's design and operating characteristics match pre-
established standards.
* Durability: Measure of a product's life.
* Serviceability: Speed, courtesy, competence, and ease of repair.
* Aesthetics: How a product looks, feels, sounds, tastes, or smells.
* Perceived Quality: Subjective evaluation based on reputation, brand image, etc.
2) Services:
* Reliability: Ability to perform the promised service dependably and accurately.
* Responsiveness: Willingness to help customers and provide prompt service.
* Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence.
* Empathy: Caring, individualized attention the firm provides its customers. 9
* Tangibles: Appearance of physical facilities, equipment, personnel, and communication materials.
## Juran’s Quality Trilogy :- Joseph M. Juran's Quality Trilogy consists of three managerial
processes:
* Quality Planning: Developing the products and processes required to meet customer needs.
* Quality Control: Evaluating actual quality performance, comparing actual performance to quality
goals, and acting on the difference.
* Quality Improvement: Creating infrastructure and processes to secure annual improvements in
quality.

## Deming’s 14 Principles :- W. Edwards Deming’s 14 points for management:

* Create constancy of purpose toward improvement.
* Adopt the new philosophy.
* Cease dependence on inspection to achieve quality.
* End the practice of awarding business on the basis of price tag alone.
* Improve constantly and forever the system of production and service.
* Institute training on the job.
* Institute leadership.
* Drive out fear.
* Break down barriers between departments.
* Eliminate slogans, exhortations, and targets for the workforce.
* Eliminate numerical quotas.
* Remove barriers to pride of workmanship.
* Institute a vigorous program of education and self-improvement.
* Put everybody in the company to work to accomplish the transformation.

## Tools and Techniques for Quality Improvement :-

Common tools:
* Check Sheets: Used to gather data systematically.
* Histograms: Show the frequency distribution of data.
* Pareto Charts: Identify the most significant causes of problems.
* Cause-and-Effect Diagrams (Ishikawa/Fishbone): Help to identify potential causes of a problem.
* Scatter Diagrams: Show the relationship between two variables.
* Control Charts: Monitor process variation over time.
* Flowcharts: Visually represent process steps.

## Statistical Process Control (SPC) Charts :- SPC charts are used to monitor process variation and
determine if a process is in control.
* They provide visual representation of data over time, with upper and lower control limits.
* These limits are calculated based on statistical methods.
* SPC helps to detect and prevent process deviations.

## Quality Assurance (QA) :- QA focuses on preventing defects by planning and implementing

processes that ensure quality.
* It's about "building quality in" rather than "inspecting quality out."
* QA includes activities like documentation, audits, and process improvements.

## Total Quality Management (TQM) Model :- * TQM is a management philosophy that emphasizes
continuous improvement, customer satisfaction, and employee involvement.
* It involves integrating all organizational functions to focus on quality.
* Key elements:
* Customer focus.
* Employee involvement.
* Process-centered.
* Integrated system.
* Strategic and systematic approach.
* Continual improvement.
* Fact-based decision making.
* Communications.

## Concept of Six Sigma and its Application

* Six Sigma is a data-driven methodology for eliminating defects and reducing variability in
processes.
* It aims to achieve near-perfect quality (3.4 defects per million opportunities).
* DMAIC (Define, Measure, Analyze, Improve, Control) is a key methodology used in Six Sigma.
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* Applications include manufacturing, service industry, and many other business sectors.
## Acceptance Sampling :-
• Meaning: Acceptance sampling is a statistical quality control technique used to decide
whether to accept or reject a lot of products based on the inspection of a sample.
• Objectives:
* Reduce the cost of 100% inspection.
* Prevent defective lots from being accepted.
* Provide a quantitative basis for acceptance decisions.
• Single Sample, Double Sample, and Multiple Sample Plans:
* Single Sampling: One sample is taken, and a decision is made based on that sample.
* Double Sampling: If the first sample is inconclusive, a second sample is taken.
* Multiple Sampling: More than two samples can be taken, with decisions made after
each sample.
•Stated Risk:
* Producer's Risk (Alpha): Risk of rejecting a good lot.
* Consumer's Risk (Beta): Risk of accepting a bad lot.

## Control Charts for Variables – Averages and Ranges

* Used to monitor continuous data (e.g., length, weight, temperature).
* Averages (X-bar) Charts: Track the mean of samples.
* Ranges (R) Charts: Track the variability within samples.
* They are used together to provide a complete picture of process variability.

## Control Charts for Defectives – Fraction Defective and Numbers Defective :-

* Used to monitor attribute data (e.g., pass/fail, defective/non-defective).
* Fraction Defective (p) Charts: Track the proportion of defective items in a sample.
* Numbers Defective (np) Charts: Track the total number of defective items in a sample.

UNIT - IV

** Operations Management - JIT, Inventory, Purchasing, and Value Analysis :-

## JIT and Lean Production System :- * JIT (Just-in-Time) Approach: • A production

strategy that aims to minimize inventory by receiving materials and producing goods only
when they are needed.
• Focuses on eliminating waste, improving efficiency, and continuous flow.

* Key principles:
• Produce only what is needed, when it is needed, and in the quantity needed.
• Eliminate waste.
• Continuous improvement.
• Respect for people.

* Implementation Requirements:
• Reliable suppliers.
• High-quality materials and processes.
• Efficient layout and flow.
• Flexible workforce.
• Strong communication and collaboration.
• Stable demand.

* Services: JIT principles can be applied to services by streamlining processes, reducing

wait times, and improving responsiveness.

* Kanban System :- • A visual signaling system used to control the flow of materials and
production.
• Uses cards or other signals to indicate when materials are needed.
• Helps to prevent overproduction and maintain a smooth flow.
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## Inventory Management
• Concepts: • Inventory refers to the raw materials, work-in-progress, and finished goods that a company holds.
• Inventory management involves planning, controlling, and optimizing inventory levels.

• Classification:
* Raw materials.
* Work-in-progress (WIP).
* Finished goods.
* MRO (Maintenance, Repair, and Operating supplies)

• Objectives:
* Minimize inventory costs.
* Ensure adequate supply to meet demand.
* Reduce the risk of stockouts.
* Optimize inventory turnover.

• Factors Affecting Inventory Control Policy:

* Demand patterns.
* Lead time.
* Inventory costs.
* Storage capacity.
* Economic conditions.

• Inventory Costs:
* Holding costs (storage, insurance, obsolescence).
* Ordering costs (processing purchase orders).
* Shortage costs (lost sales, customer dissatisfaction).

• Basic EOQ (Economic Order Quantity) Model: - *A model that calculates the optimal order quantity to
minimize total inventory costs.
* EOQ = \sqrt{\frac{2DS}{H}}
Where: D = Annual demand., S = Ordering cost per order. H = Holding cost per unit per year.

• Re-order Level:
* The inventory level at which a new order should be placed.
* Reorder level = Lead time demand + Safety stock

• ABC Analysis:
* A technique that categorizes inventory items based on their value or importance.
* A items: High value, tight control.
* B items: Medium value, moderate control.
* C items: Low value, minimal control.

• Logistics and Franchising:

* Logistics involves the efficient flow and storage of goods from point of origin to point of consumption.
* Franchising is a method of distributing goods or services. Inventory management is a key concern for both.

## Purchasing Management
• Objectives:
* Obtain high-quality materials and services.
* Minimize purchasing costs.
* Ensure timely delivery.
* Maintain good supplier relationships.

• Functions:
* Supplier selection.
* Negotiation.
* Order placement.
* Contract management.
* Supplier performance evaluation.

• Methods:
* Competitive bidding.
* Negotiation.
* Reverse auctions.
* Supplier partnerships.

• Procedure:
* Identify requirements.
* Select suppliers.
* Issue purchase orders.
* Receive and inspect goods.
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* Process invoices.
## Value Analysis :-
• Concepts: * A systematic approach to improving the value of products or services by
analyzing their functions and costs.
* Focuses on eliminating unnecessary costs while maintaining or improving quality.
* Value = Function / Cost
• Stock Control Systems:
* Systems used to manage and track inventory levels.
* Examples: Perpetual inventory systems, periodic inventory systems.
• Virtual Factory Concept:
* A network of geographically dispersed organizations that collaborate to produce goods
or services.
* Relies on information technology to coordinate activities.
• Production Worksheets:
* Documents that provide detailed instructions for production processes.
* Help to ensure consistency and efficiency.

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