Production Management BBA(II) MDU students

Production Management & TQM Study Material For BBA (Industry Integrated) 3rd Semester

Compiled by: Ms. Neelam Gulati Ms. Sushil Luthra

Published by: National Institute Of Applied Management (National Co-ordinating Institute of M.D.U, Rohtak.) 3,Tamoor Nagar , New Friends Colony, New Delhi-65

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CONTENTS Unit 1 Chapter1 Production Management  Meaning, Nature , Scope and major decision areas of production /operation management.  Organizational chart of production management department  Products vs. Services  Objectives of production management  Value analysis

Chapter II Demand Forecasting  Patterns of demand  Factors affecting demand  Methods of forecasting

Unit 2 Chapter I Facilities location  Factors affecting size of the firm  Factors affecting location of a firm  Selection of a site (urban, rural, sub-urban)  Recent trends in location

Chapter II Capacity planning  Meaning of capacity  Measures of capacity

Chapter III Plant layout  Meaning of plant layout  Objectives of plant layout  Types of layout  Costs associated with layout

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 Techniques of plant layout

Chapter IV Production system  Meaning  Types of production system  Evaluation of various production systems

Chapter V Material handling system  Factors & principles of material handling system  Types of material handling equipment

UNIT 3 Chapter I Aggregate planning  Meaning  Linear programming model  Transportation model  H.M.M.S MODEL

Chapter II Production planning and control  Meaning and objectives of production planning  Production planning an integral part of corporate plan  Meaning of production control  Objectives of production control  Production planning and control (PPC)  PPC for shop production  PPC for mass production

Chapter III Production scheduling  Meaning of scheduling  Techniques of scheduling

UNIT 4 3

Chapter I Inventory control  Meaning and objectives of material management  Purpose of inventories  Purchasing process  Vendor development  Economic order quantity  Selective inventory control

Chapter II Quality assurance  Meaning  Aspects of quality  Importance of quality  How does management decide quality  Quality insurance system  Quality control through statistical techniques

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Unit 1

Chapter1 Nature and Scope of Production Management  Meaning, Nature , Scope and major decision areas of production /operation management.  Organizational chart of production management department  Products vs. Services  Objectives of production management  Value analysis

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Meaning of Production Production is an intentional act of producing something in an organized manner. It is the fabrication of a physical object through the use of men, material and some function which has some utility e.g. repair of an automobile, legal advice to a client, banks, hotels, transport companies etc. The main inputs are information, management, material, land, labour and capital. This figure shown below explains the production process of an organization.

PRODUCTION PROCESS SYSTEM INPUTS

PROCESS

OUTPUT

Information Management

Transformation

Material & land

Goods & service

Labor, capital

Meaning Of Production Management A few definitions of production management are being reproduced here under to understand the meaning of the term clearly: 1. “Production management is the process of effectively planning and regulating the operations of that part of an enterprise which is responsible for actual transformation of materials into finished products”. Elwood S. Buffa has defined the term in a broader sense as:

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2. “Production management deals with decision making related to production process so that the resulting goods or services are produced according to specifications, in amounts and by the schedules demanded and at a minimum cost”.

Production management, thus, is assigned with the following tasks. i. ii. iii.

Specifying and accumulating the input resources, i.e., management, men, information, materials, machine and capital. Designing and installing the assembling or conversion process to transform the inputs into output, and Coordinating and operating the production process so that the desired goods and services may be produced efficiently and at a minimum cost.

The production department in an enterprise is not only concerned with the full exploitation of production facilities but also the human factor that indirectly affects the production, utilization of latest techniques of production and the production of quality goods to the satisfaction of customers of the product. The various activities that form scope of production function can be studied in the following broad areas:

Product selection & Design

Activities relating to production system Designing Facilities Location

Production Control

Method Study

Inventory Control Production planning

Capacity Planning

Facilities layout & materials handling

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i.

Product selection and design: the product mix marks the production system either efficient or inefficient. Choosing the right products keeping the mission and overall objective of the organization in mind is the key to success. It is the design of the product, which makes the organization competitive or noncompetitive.

ii.

Activities relating to production system designing: decision related to the production system design is one of the most important activities of the production management. This activity is related to production engineering and includes problems regarding design of tools and jigs, the design, development and installation of equipment and the selection of the optimum size of the firm. All these areas require the technical expertise on the part of the production manager and his staff.

iii.

Facilities location: the selection of an optimum plant location very much depends upon the decision taken regarding production engineering. A wrong decision may prove disastrous. Location should as far as possible cut down the production and distribution cost. There are diverse factors to be considered for selecting the location of a plant.

iv.

Method study: the next decision regarding production system design concerns the use of those techniques, which are concerned with work environment and work measurement. Standard method should be devised for performing the repetitive functions efficiently. Unnecessary movements should be eliminated and suitable positioning of the workers for different processes should be developed. Such methods should be devised with the help of time study and motion study. The workers should be trained accordingly.

v.

Facilities layout and materials handling: plant layout deals with the arrangements of machines and plant facilities. The machine should be so arranged that the flow of production remains smooth. There should not be overlapping, duplication or interruption in production flow. Product layout where machines are arranged in a sequence required for the processing of a particular product, and process layout, where machines performing the similar processes are grouped together are two popular methods of layout. The departments are layout in such a way that the cost of material handling is reduced. There should be proper choice of material handling equipment.

vi.

Capacity planning: This deals with the procurement of productive resources. Capacity refers to a level of output of the conversion process over a period of time. Full capacity

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indicates maximum level of output. Capacity is planned for short-term as well as for long term. Process industries pose challenging problems in capacity planning, requiring in the long run, expansion and contraction of major facilities in the conversion process. Tools for capacity planning are marginal costing (Break Even Analysis), learning curves, linear programming, and decision trees. vii.

Production planning: the decision in production planning include preparation of shortterm production schedules, plan for maintaining the records of raw materials, finished and semi-finished stock, specifying how the production resources of the concern are to be employed over some future time in response to the predicted demand for products and services

viii.

Production control: after planning, the next managerial production function is to control the production according to the production plans because production plans cannot be activated unless they are properly guided and controlled. Acc. To Soriebal and Lansburgh “Production control is the process of planning production in advance of operations; establishing the exact route of each individual item, part or assembly; setting, starting and finishing dates for each important item, assembly and the finished products; and releasing the necessary orders as well as initiating the required followup to effect the smooth functioning of the enterprise ix.

Inventory Control: inventory control deals with the control over raw-materials, work-inprogress, finished products, stores, supplies, tools, and so is included in production management. The raw materials, supplies etc should be purchased at right time, right quality, in right quantity, from right source and at right price.

ORGANIZATIONAL CHART OF PRODUCTION MANAGEMENT DEPARTMENT Managing Director

Works Manager

Managers of Various Production Departments

A

1

B

2

1

2

C

3

1

D

1

2

E

3

1

3

4 2

3 9

2

4

Sections Headed by Foreman or Superintendents

PRODUCTS VERSUS SERVICES The output is spoken as a “bundle of products and services” . The line between product & services is not necessarily always clear. Nevertheless, there are important differences between them. Products are tangible things that we can carry away with us, where as services are intangible and perishable and are consumed in the process of their production. Products may be produced to inventory and made available “ off-the-shelf” whereas the availability of the services requires keeping the productive system that produces them in readiness to produce the services, as they are needed. In addition the person being served often participates in the productive process. In product systems, there is very little if any, contact between the producers and consumer.

Characteristics Of Systems To Produce Products Versus Systems To Produce Services PRODUCTS Tangible

SERVICES Intangible and perishable; consumed in the process of their production

Can be produced to inventory for-off theshelf” availability

Availability achieved by keeping the productive system open for services

Minimal contact with ultimate consumer

High contact with clients or customers

Complex and interrelated processing

Simple processing

Demand on productive systems variable Demand commonly variable on weekly, monthly, and seasonal basis hourly, daily and weekly bases .

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Markets served by productive system are regional, national and international Markets served by productive system are usually local Large units that can take advantage of economies of scale Relatively small units to serve local markets Location of system is in relation to regional, national and international Location dependent on location of

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markets

local customers, clients and users

PRODUCTS AS A PART OF SERVICE Similarly, the clear line between products and services in a service-oriented system seems to fade. A fast-food operation delivers physical product along with the service. An auto repair service repairs the car and provides the required parts as well. Hospital care involves medication, bandages, X-ray film, and so on Thus, although it may be valid to think of systems as primarily producing either products or services, it is better to think in terms of relative emphasis. Some manufacturing systems are predominantly the producers of goods and provide very little service. Some service organizations, such as tax consultants, provide almost no physical product as a part of the service. But most productive systems provide a bundle of products and services, and an appropriate analysis of the problems of production/operations management should recognize both aspects of the outputs of the system.

OBJECTIVES OF PRODUCTION/ OPERATIONS MANAGEMENT Every system (or organization) has a purpose, certain objectives & goals to achieve since the objectives of an organization have hierarchical structure, sub-goals lead to accomplishment of goals, which contribute, to the achievement of objectives and eventually the purpose or mission of an organization .It is very important that these objectives should be unambiguously identified, properly structured and explicitly stated. In general terms, the objectives of an organization may be to produce the goods/or services in required quantities and of right quality as per schedule and at a minimum cost. Thus quantity, quality and time schedule are the objectives that determine the extent of customer satisfaction. If an organization can provide for these at a minimum cost then the value of goods created or services rendered enhances and that is the only way to remain competitive. Thus various objectives can be grouped as- performance objectives and cost objectives.

Performance Objectives The performance objectives may include: a) Efficiency or productivity expressed as output per unit of input. b) Effectiveness: It concerns expressed whether a right set of outputs is being produced. Where efficiency may refer to “doing things right”, effectiveness may mean “doing the right things”.

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c) Quality: Quality is the extent to which a product or service satisfies the customer needs. The output has to conform to quality specifications laid down before it can be accepted d) Lead times: Manufacturing lead-time or throughput time is the time elapsed in the conversion p Minimization of idle time, delays, waiting etc. will reduce throughput time. e) Capacity utilization: Percentage utilization of manpower, machines etc. is calculated in order to enhance overall capacity utilization. f) Flexibility: If the conversion process has the flexibility of producing a combination of outputs, it is possible to satisfy a variety of customer needs.

Cost objectives Attaining high degree of customer satisfaction on performance front must be coupled with lower cost of producing the goods or rendering a service. Thus cost minimization is an important systems objective. Costs can be explicit or implicit. These could be tangible in economic terms or intangible in social cost terms- such as delayed supplies, customer complaints etc. While managing production systems we must consider the visible and invisible, tangible and intangible costs some examples of these costs are: a) Explicit costs:    

Material cost Direct and Indirect labour cost Scrap/rework cost Maintenance cost

b) Implicit costs:  Cost of carrying inventory  Cost of stock outs, storage, back-logging, lost sales  Cost of delayed deliveries  Cost of material handling  Cost of inspection  Cost of grievances, dissatisfaction  Down time cost  Opportunity cost For the purpose of managerial decision-making, we should consider the total relevant systems costs including visible and invisible. A longer term cost implication rather than only short-term will help in arriving at better decision.

OPERATIONS MANAGEMENT DECISIONS The process of management Essentially management can be considered as a process of planning, organizing, coordinating and control. 12

There are different ways in which the production management functions can be grouped . For instance, all the decisions concerning the production system could be divided as:1. Periodic decisions which include selection, design and updating of resource, structure, systems and procedures. 2. Continual decisions which are required in day-to-day operations and control of production systems.

Value Analysis Value analysis is a cost reduction & control technique, which operates by attacking the basic design of the product or service. Value analysis is “an organized procedure for the efficient identification of unnecessary costs by analysis of function --function being that property of product which makes it work or sell.” This means value analysis involves:1. Identification of function- the first & most important, step in the value analysis is to make a formal statement of the function of the product or service. Function means- what is purpose of operation? What does it do? A lamp function is to ‘give light’ A beam function is to ‘support weight’ A cheques function is to ‘transfer cash’ A shaft’s function is to ‘transmit force’. - Identification of function of product - Examine alternative way in which this function can be done. - Choosing the least cost alternative. Value Engineering – The application of value analysis techniques at the design stage of a product or service. Value 1. Value may be equated with a price, which is that which must be given, done sacrificed to obtain a thing and any product or service will have several different values. Exchange value, the price a purchaser will offer. This is sum of two parts, value due to usefulness & the value the ownership itself bestows. Exchange value = use value + esteem value. Use value = the price the purchaser will offer in order to ensure that the purpose (or function) is achieved. Esteem value = the price which is offered beyond the use value e.g. possession of ----------? Exchange value is set by the market & is influenced by the usefulness & esteem in which the product is held. 2. Cost value (intrinsic value)- sum of all the costs incurred in providing the product. Profit = exchange value – cost value The task of a value analyst is to increase exchange value & decrease cost value. Carrying out a value analysis exercise:

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Value analysis team – it must consist of a small core of experienced people + concerned people + intelligent laymen to raise basic & fundamental questions. A Structured Approach – Gage has laid down a 12-step process for conducting value analysis exercise. 1. Select the product to be analysed based on - Multiplicity of components. - Large forecast usage. - Small difference between use value & cost value. - Considerable market competition. - A long designed product. - Generation of considerable documentation. - Creation of organizational complexity. 2. Extract the cost of product – the cost required here is the marginal or out of pocket cost – as overheads can distort the picture. Details of individual components at this stage are not required. 3. Record the number of parts – the larger the number of parts, greater the chances of reduction. 4. Record all the functions – purpose of the product. 5. Record the number required currently & in future. 6. The above five questions are the fact finding – they firmly establish the bases upon which all further work is created. 7. Determine primary function from all the functions already listed in ‘4’. Some priority must be established among functions. 8. List of all other ways of achieving the primary function – here ‘creativity & brainstorming’ plays important role. This should include part wise/component wise discussion. 9. Assign costs to various alternatives. 10. Examine the 3 cheapest alternatives. 11. Decide which idea should be further developed. 12. See what other functions need to be incorporated – reexamining of step 11. Does its use contribute value.’ Can anything be removed without degrading the product? While the new product is being developed the value analysis team can undertake the final step. 13. Ensure the new design is accepted. This will mean: - A model - Anticipated savings. - Anticipated capital expenditure. - Improvement in value. - Critical path analysis. Gage’s 12- value analysis. 1. What is it? 2. What does it cost? 3. How many parts? 4. What does it do? 5. How many functions are required? 6. What is primary function? 7. What else will it do?

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8. 9.

What will that cost? Which 3 alternative ways of doing the job show the largest difference between ‘cost & use value’? 10. Which ideas are to be developed? 11. What other functions & specification features must be incorporated? 12. What is needed to sell the ideas & forestall ‘road blocks’?

Unit 1 Chapter II Demand Forecasting  Patterns of demand  Factors affecting demand  Methods of forecasting

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DEMAND FORECASTING Forecasts are needed to aid in determining what resources are needed, scheduling existing resources, and acquiring additional resources. Accurate forecasts allow scheduler to use machine capacity efficiently, reduce production times, and cut inventories. Forecasting methods may be based on mathematical models using historical data available, qualitative methods drawing on managerial experience, or a combination of both. Forecasting demand in such situations require uncovering the underlying patterns from available information. Patterns of Demand The five basic patterns of the most demand time series are-: 1. Horizontal, or the fluctuation of data around a constant mean; 2. Trend, or systematic increase or decrease in the mean of the series overtime; 3. Seasonal, or a repeatable pattern of increase or decrease in demand, depending on the time of day, week, month, or season; 4. Cyclic, or less predictable gradual increases or decreases in demand over longer periods of time (years or decades); and 5. Random, or unforecastable, variation in demand Four of the patterns of demands- Horizontal, Trend, Seasonal, and Cyclic- combine in varying degrees to define the underlying time pattern of demand for a product or service. The fifth pattern, random variations, results from chance causes and thus cannot be predicted. Factors Affecting Demand Generally such factors can be divided into main categories: - Externals and Internals.

External Factors. External factors that affect demand for a firm’s products or services are beyond management’s control. Leading indicators. Such as the rate of business failures, are external factors with turning points that typically precede the peaks and troughs of general business cycle. Coincident indicator, such as unemployment figures, are the time series with turning points that generally match those of the general business cycle. Lagging indicators, such as retail sales, follow those turning points, typically by several weeks or months.

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INTERNAL FACTORS: internal decision about product or service design, price and advertising promotion, packaging design, sales persons quotas or incentive and expansion and contraction of geographic market, target areas all contribute to changes in demand volume. The term demand management describes the process of influencing the timing and volume of demand or adapting to the undesirable effects of unchangeable demand patterns.

Forecasting methods The two general types of forecasting techniques used for demand forecasting are: Qualitative methods and Quantitative methods Qualitative Method: Qualitative methods include judgment methods, which translate the opinions of managers, expert opinions, consumer surveys and sales force estimates into quantitative estimates. Quantitative Methods: Quantitative methods include casual methods and time series analysis. Casual Methods: Use historical data on independent variables, such as promotional campaigns, economics conditions, and competitors’ actions, to predict demand. Time series analysis is a statistical approach that relies heavily on historical demand data to project the future size of demand and recognize trends and seasonal patterns. Judgement Methods When adequate historical data are lacking, as new product is introduced or technology is expected to change, firms rely on managerial judgment and experience to generate forecasts. I Sales Force Estimate Sales force estimates are forecasts compiled from estimates of future demand made periodically by members of a company’s sales force. This approach has several advantages. • The sales force is the group most likely to know which products or services customers will be buying in the near future, and in what quantities. • Sales territories often are divided by district or region. Information broken down in this manner can be useful for inventory management, distribution, and sales force staffing purposes. • The forecasts of individual sales force members can be combined easily to get regional or national sales. But it also has several disadvantages. • Individual biases of the sales people may taint the forecast; moreover, some people are naturally optimistic, other more cautious. • Sales people may not always be able to detect the difference between what a customers “wants” (a wish list) and what a customer “needs” (a necessary purchase).

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•

II

If the firm uses individual sales as a performance measure, salespeople may underestimate their forecasts so that their performance will look good when they exceed their projections or may work hard only until they reach their required minimum sales. EXECUTIVE OPINION

Executive opinion is a forecasting method in which the opinions, and technical knowledge of one or more managers are summarized to arrive at a single forecast. As we will discuss later, executive opinion can be used to modify an existing sales forecast to account for unusual circumstances, such as a new sales promotion or unexpected international events. Executive opinion can also be used for technical forecasting. This method of forecasting has several disadvantages. Executive opinion can be costly because it takes valuable executive time. Although that may be warranted under certain circumstances, it sometimes gets out of control. In addition, if executives are allowed to modify a forecast without collectively agreeing to the changes, the resulting forecast will not be useful. III

MARKET RESEARCH

Market research is a systematic approach to determine consumer interest in a product or services by creating and testing hypotheses through data-gathering surveys. Conducting a market research study includes 1. Designing a questionnaire that request economic and demographics information from each person interviewed and asks whether the interviewee would be interested in the product or services; 2. Deciding how an administrative sample of household to survey, whether by telephone polling, mailings, or personal interviews; 3. Selecting a representative sample of households to survey, which should include a random selection within the market area of the proposed product or service; and 4. Analyzing the information using judgment and statistical tools to interpret the responses, determine their adequacy, make allowance for economic or competitive factors not included in the questionnaire, and analyze whether the survey represents a random sample of the potential market. Market research may be used to forecast demand for the short, medium, and long term. Accuracy is excellent for the short term, good for the medium term, and only fair for the long term. IV

DELPHI METHOD

The Delphi method is process of gaining consensus from a group of experts while maintaining their anonymity. This form of forecasting is useful when there are no historical data from which to develop statistical models and when managers inside the firm have no experience on which to base informed projections. A coordinator sends a question to each member of the group of outside experts, who may not even know who else, is participating. The Delphi method can be used to develop long-range forecasts of product demand and new product sales projections. It can also be used for technological forecasting. The Delphi methods can be used to obtain a consensus from a panel of experts who can devote their attention to following scientific advances, changes in society, government regulations, and the competitive environment.

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The Delphi method has some shortcomings, including the following major ones. • The process can take a long time (sometime a year or more). During that time the panel of people considered to be experts may change, confounding the results or at least further lengthening the process. • Responses may be less meaningful than if experts were accountable for their responses. • There is little evidence that Delphi forecasts achieve high degrees of accuracy. However, they are known to be fair- to- good in identifying turning points in new product demand. • Poorly designed questionnaires will result in ambiguous or false conclusions. CAUSAL METHODS: I LINEAR REGRESSION In linear regression, one variable, called a dependent variable, is related to one or more independent variables by a linear equation. In the simple linear regression models, the dependent variable is a function of only one independent variable, and therefore the theoretical relationship is a straight line: Y=a + bX Where Y = dependent variable X = independent variable a = Y-intercept of the line b = slope of the line. The objectives of linear regression analysis is to find values of a and b that minimize the sum of squared deviations of the actual data points from the graphed line. The sample correlation coefficient, r, measures the direction and strength of the relationship between the independent variable and the dependent variable. The value of r can range from – 1.00 to + 1.00. II TIME SERIES METHODS Simple Moving Averages. The simple moving average method is used to estimate the average of demand time series and thereby remove the effects of random fluctuation. It is most useful when demand has no pronounced trend or seasonal influences. Specially, the forecast period t + 1, can be calculated as Ft+1 = sum of last n demands n where

=

Dt + Dt+1 + Dt-2 +…..Dt-n+1 n

Dt = actual demand in period t n = total number of periods in the average Ft+1 = forecast for period t + 1

Weighted Moving Averages. In the simple moving average method, each demand has the same weight in the average --namely, 1/n. In the weighted moving average method; each historical demand in the average can have its own weight. The sum of the weight equal 1.0.

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The advantage of a weighted moving average method is that it allows you to emphasize recent demand over earlier demand. The forecast will be more responsive than the simple moving average forecast to changes in the underlying average of the demand series. Nonetheless, the weighted moving average forecast will still lag behind demand because it merely averages past demands. This lag is specially noticeable with a trend because the average of the time series is systematically increasing or decreasing.

III EXPONENTIAL SMOOTHING. The exponential smoothing method is a sophisticated weighted moving average method that calculates the average of a time series by giving recent demands more weight than earlier demands. It is the most frequently used formal forecasting methods because of its simplicity and the small amount of data needed to support it. Ft+1 =α(Demand this period) + (1-α) (Forecast calculated last period)= αDt+(1-α)Ft Ft+1 =Ft + α(Dt-Ft) Larger α values emphasize recent levels of demand and result in forecasts more responsive to changes in the underlying average. Smaller α values treat past demand more uniformly and result in more stable forecasts. Exponential smoothing requires an initial forecast to get started. There are two ways to get this initial forecast: Either use last period’s demand or, if some historical data are available, calculate the average of several recent periods of demand. The effect of the initial estimate of the average on successive estimate of the average diminishes over time because, with exponential smoothing, the weights given to successive historical demands used to calculate the average decay exponentially. Exponential smoothing has the advantages of simplicity and minimal data requirements. It is inexpensive to use and therefore very attractive to firms that make thousands of forecasts for each time period. However, its simplicity also is disadvantage when the underlying average is changing, as in the case of a demand series with a trend.

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Unit 2

Chapter I Facilities location    

Factors affecting size of the firm Factors affecting location of a firm Selection of a site (urban, rural, sub-urban) Recent trends in location

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FACILITIES LOCATION Every organisation has to face location problem one or the other day . Before finding out those reasons for location decision and the factors affecting thereof one would like to know the following :-

FACTORS AFFECTING SIZE OF THE FIRM 1. Availability of capital: the size of the firm depends upon the availability of capital. 2. Entrepreneurial ability and efficiency: the ability, experiences and managerial efficiency of the entrepreneur is one of the important factors that determine the size of the business unit. 3. Risk of uncertainties: firms have to face fluctuations in demand for their products and accordingly adjust their policies and strategies in order to survive and maintain the positioning in the market.

TYPE OF ORGANIZATION: The size of the firm also depends on the type of organization, e.g., sole trading business concern or individual proprietorship, partnership firm, private companies that are managing business on small and medium scale. Joint Stock Companies require capital on large scale. Availability of inputs: The size can be larger if the inputs are available on a large scale. Where the inputs will have to be transported from a distance and there is also some uncertainty, the size is bound to be small. Nature of product: In the case of processing of raw materials resulting in the production of joint and by products, the scale is naturally more if the entrepreneur decides to process all the products. In case of production of less standardized and more artistic products the size is bound to be small.

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Laws of returns: But where increasing returns apply, large production will result in lower cost, so that the firms can keep on growing larger in size provided the demand for the product is elastic. Government regulation or licensing policy of government: The size of the firm depends on the decision taken by the entrepreneur and on the attitude of the government.

FACTORS AFFECTING THE PLANT LOCATION 1. Primary factors

Supply of Raw-material Supply Of Capital to market Transport facilitities

Nearness

Availability of power

Labour Supply

2. Secondary factors Miscellaneous

Facilities

Factors Personal Factors Initial start & goodwill Historical & Religious Factors

Natural Factors

Political Factors Govt. Subsidies & Facilities

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FACTORS OF LOCALISATION: a)Primary factors 1.Supply of raw material: It is necessary to consider the adequate supply of raw materials and the nature of raw materials. The cost of raw materials is an important element of the total cost of production. 2.Nearness to market: Nearness to market is important from the point of view of control over the market. In those industries where the raw materials are obtained from different source, nearness to source of raw materials is not as important as nearness to the market. 3.Transport Facilities: Speedy transport facilities are needed for the regular and timely supply of raw materials at low . 4.Supply of labour :The supply of labour at low cost is important .It should also be regular . Nearness to source of labour supply is very important . Therefore , producers should have regular labour supply by reducing absenteeism and strikes due to unsatisfactory working conditions . 5.Power: power may be electrical , diesel and atomic energy . All types of power required must be in abundance in order to ensure smooth flow of production. 6.Supply of capital :Industries require huge capital hence capital market must be developed at industrial centres . Not only this , industrial development banks and other financial services must also be encouraged . b)Secondary Factors 1.Natural factors--affect the location of those industries which require a particular climate or weather conditions 2.Political factors-States with stable government attract more industries

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3.Government Subsidies and Facilities- Government gives subsidies and good industrial development facilities in backward areas . Industries reach these places to reap the benefits of such facilities. 4.Historical and Religious Factors- some places have industrial importance and some have religious importance e.g. Kohlapur, Benaras ,Agra ,Nasik etc. Industries grow because of these important features. 5.Initial Start and Goodwill- Once one industry starts at a certain place other industries come their. E.g. Jamshedpur became an industrial town in the following manner . 6.Personal Factor: Personal likeness for a place affects the establishment of business at a place . 7.Miscellaneous factorsa)sufficient water supply b)Disposal of waste c)Dangers of air-attacks d)Community attitude e)Ecological and environment considerations etc.

Selection Of Site (Urban, Rural Or Suburban Area) There are broadly three possible alternatives open for the selection of the locality of the industrial unit: 1. urban or city area 2. rural area 3. suburban area The relative advantages and disadvantages of each area are discussed as under:

URBAN AREA Due to certain typical advantages available only in the city area, promoters show preference for the city area as the location of the industrial unit. ADVANTAGES OF CITY AREA 1. 2. 3. 4. 5. 6.

Availability of good transportation facilities Good and prompt postal and communication services Banking and credit facilities. Services of insurance companies. Sufficient storing facilities. Ample availability of skilled and unskilled workers.

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7. Vicinity of the market. 8. Facility of the ancillary and service units. 9. Transport facilities by road and railways. 10. Development of the training institutes. 11. Educational, medical and recreational institutes increase the amenities of lives. DISADVANTAGES OF URBAN OR CITY AREA 1. 2. 3. 4. 5. 6. 7.

The cost of land is very high. Sufficient land is not available. The cost of labour is relatively high. The rate of labour turnover is very high. Trade union movement is very strong. The rates of taxes are also relatively high. The industrialization in the city area gives birth to slums and dirty residences which creates the typical problems of sanitation and health.

RURAL AREA The following are its advantages and limitations. Advantages of Rural Area 1. 2. 3. 4. 5. 6.

The land is available at cheaper rates. Large plots of the land available. The rates of labour are relatively lower. The rate of labour turnover is low. The industrial relations between labour and management are relatively amicable. The municipal restrictions, which are found in city areas, do not exist in rural areas, e.g., height of building, constructed area in total land etc. 7. Slums and dirty residence are not found in rural areas. 8. No danger of bombardment in wartime. LIMITATIONS OF RURAL AREA 1. Transportation facilities are not available 2. Sometimes the services of post and telegraph and means of communication are not available 3. Banking and credit facilities are also not available 4. Absence of insurance facilities 5. Storing and warehouse facilities 6. Passenger facilities are not available 7. The advantage of ancillary units and service unit is not available 8. Such units are very far from the market place and this increases the cost of distribution of finished goods

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9. Skilled workers are not available 10. Municipal facilities like water supply, drainage, fire fighting are not available in rural areas 11. There is absence of recreation facilities, good educational institutes, good and sufficient medical facilities etc.

Suburban area The city area as a location of industrial unit has got many negative aspects. The other extreme is a rural area, which again is not free from many limitations. The better compromise in the decision is in the selection of suburban area as the location of the industrial unit. Suburban area is the area located on the outskirts of the city area. Suburban area matches the advantages of the rural area with those of city area which is located at a short distance, e.g. Odhav, narol, kathawada, naroda, and vatva are the suburban areas of the ahmedabad city. Advantages of suburban area 1. 2. 3. 4. 5.

Land is available at a cheaper rate Adequate land is available Infrastructure facilities like road, water supply, drainage etc. Skilled and unskilled both type of labourers are available It is possible to tap the advantage of industrial training institutes, management development programmes etc, which are available in nearby city area 6. The nearby city area provides a substantial market for the products of the unit 7. Educational institutes, medical facilities and other recreational facilities are available in the suburban area itself as well as in the nearby city area The limitation of suburban area as a site for industry is that in the development process, it may be converted into a part of the urban area with all its merits and demerits.

Recent trends in the location of industries The traditional factors like nearness of sources of materials, motive power, nearness of markets, labour supply etc. have no longer remained the effective pulling forces for location of industries. The location trends have changed substantially due to the development of substitute raw materials, network of electrification and transportation by roads and railway, mobility of the labour and persuasive and compulsive policies of the government for balanced regional development. The recent trends in the selection of industrial locations can be described as under. 1. Priority for the sub urban areas: the industrialist shows their preference of the sub urban area as the sight for establishment of a new unit or relocation of the existing one. The industrial policy of the government does not permit the establishment of a new unit or expansion of an existing one in city areas. 2. Industrial development in the notified backward areas: in order to have balanced regional development, the central government as well as the state government has notified certain backward areas; example punch mahals, bharuch and sunder nagar are the centrally

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notified backward district of gujarat state. Similarly, gujarat state government has also notified certain backward talukas. Different types of incentives like cash subsidy, tax relieves, concessional financial assistance, cheaper land and power supply etc. are provided. So, many such areas have been developed substantially in recent times. An illustration can be cited for the industrial development of dhabol in punch mahals, ankleshwar in bharuch and sunder nagar. 3. Establishment of industrial estate: industrial estate is a piece of vast land divided into different plots wherein factory shades are constructed. The government of India has planned a national policy for the development of industrial estate. It has assigned a responsibility of the development of the industrial estate to state governments. In each state, the state development corporation (sdc) has developed many industrial estates practically in all the districts of the state. Industrial estates have also been developed by private entrepreneurs and chambers of commerce. The plots of land along with factory shades and infrastructure facilities are developed in the industrial estates and are sold to the prospective promoters. The establishment of industrial states has greatly affected the location of industry. 4. Decentralization of industries: under the conscious industrial policy of the government, concentration of industrial units is prevented through licensing policy. New units are not permitted to be started and certain industrially congested areas. Similarly, existing units are established in additional plants in a less developed areas or sometimes relocate the whole unit in such areas. 5. Increased role of the govt in the decision of location of industries: government through persuasive and compulsive methods greatly affects the location decisions in recent times. It provides certain attractive incentives to the promoters to establish their units in less developed areas, at the same time it does not permit excessive industrialization in certain developed areas. 6. Competition between government and institutions: as industry provides job opportunities to the local population, many local organizations attempt to tempt the prospective promoters to establish the units in their areas. They provide different types of incentives like cheap land, relief in local taxes etc. Sometimes the objective of local organizations and the government comes in conflict on the issue of the location of the industries. Thus, the whole pattern of decision about the location of industries has undergone substantial changes in recent times.

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Unit II Chapter II Capacity planning  Meaning of capacity  Measures of capacity

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Capacity Planning The long-range operations strategy of an organization is expressed by capacity plans. Following issues must be considered in capacity planning: 1. Market trend in terms of market size, location, & technology innovation. 2. Effect of new product. 3. Variation (seasonal) in demand. 4. Review of existing policies for using overtime & multiple shifts. 5. Should we expand existing facilities or build new capacities. 6. Should we add small units or big units? The above issues should be resolved as a part of capacity planning. In assessing alternatives, the revenues, capital costs, & operating costs may be compared, but managers should strike a trade off between possible effects of the strategic issues against economic advantages & disadvantages.

Measures of capacity: -

-

When outputs are relatively homogenous, capacity units are rather obvious. For e.g .an Auto plant uses number of autos, beer plant uses cases of beer etc. When the output units are diverse, it is common to use the measure of the availability . For e.g.- airlines use seat available i.e. seat miles as a measure instead of seats. When different types of equipment are used for performing a wide variety of machinery operation, & the output may be unique parts. The value of the labor & material of the output could vary widely. Thus the capacity of the shop is normally stated as the capacity of the limiting resources, e.g., the labour hours. Measure of capacity of different organizations Type Of Org.

Capacity Measures

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Auto Plant Beer Plant Power Plant Airlines Hospital Restaurant

Number Of Autos Cases Of Beer Mw Available Seat Miles Available Bed Days Available Seat Turns

Industry capacity & competitive dynamics: “Should any capacity be added with in the industry ‘’. is an important question. In answering this question, one has to take care of long-term projections of demand & competitors capacity too. For further discussion we assume decision to add capacity already taken for industry & in principle for organisation.

Capacity decision for mature products with stable demand: Many products enjoy mature stable markets e.g. steel, aluminum, and fertilizer, cement, and airline services, health care services. Many products & services are also affected by recession but their trend in demand is relatively stable. The casual/normal sales forecasting methods are used for these products are common methods for estimating future demands. In addition to formal perspective methods, executive opinion & extrapolation are also used. Given long-range predictions of demand, we must generate capacity requirements. First of all we find out individual capacity of each sub-unit. e.g. – M/C shop, assembling, shipping etc. identifying the size & timing of projected capacity gaps provides input for the generation of alternative plans. We may plan to meet demand either by providing the expected required capacity or by partially utilizing alternative sources or we may enlarge existing facilities, establish new producing; locations for the additional capacity, or relocate the entire operation.

Capacity decision for new products & risky situations. It is difficult to predict capacity requirements for new products initially or in the rapid development phase of product life cycles. There are also situations involving mature, stable products, such as oil, in which the capacity planning environment is risky owing to unstable political factors. The prediction of capacity requirements in these kinds of situation must place greater emphasis on the distribution of the expected demand. Optimistic & pessimistic predictions can have a profound effect on capacity requirements. There are widely different capacity needs for the optimistic & pessimistic predictions. If we accept the optimistic schedule, we need capacity additions & huge capacity addition within 10 years (approx). If we fail to provide the capacity, we may miss the market & lost sales could be an important opportunity cost. On the other hand, if we assume the pessimistic schedule, we need only modest amounts of capacity within 5 years that might be provided by multiple shifts & overtime. Decision tree analysis is used to incorporate uncertainties in the evaluation of alternative capacity plans.

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Generation of alternative capacity plans. When capacity gaps have been identified alternative plans should be considered. These alternatives may involve the size & timing of added capacity, the use of overtime & multiple shifts, the use of outside capacity resources, the absorption of lost sales, or the location of new capacity.

Economies of scale For a given facility there should be an optimum output that minimizes fixed plus variable costs. Optimum output for a given facility. TOTAL COST/UNIT

Cost/un it

VARIABLE COST/UNIT

FC

Units

The above diagram indicates the optimum output for a given facility. Optimum output is that output for which the total cost/unit is minimum. In the above figure variation in variable cost is due to overtime otherwise variable cost remains same for each unit.

Economies of scale by successively larger plants

COST/UNIT

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SMALLER SIZE

MONTHLY PRODUCTION UNITS

In above figure there is variation in cost curve due to successive increase in size of plant. There are economies of scales that may come from two basic sources: lower fixed cost/unit & variable cost/unit. The lower fixed cost accrues because plant & equipment costs of larger plants are lower in proportion to capacity. Larger plants are likely to have a better balance of sub units with less slack capacity in sub units. Lower variable cost may also accrue with the larger plant because larger volume may justify more mechanization and automation. The result is that minimum unit costs are less for larger plants. Economic evaluation of capacity: 1. Mature products with stable demandCapacity plan alternative may involve various size units that differ in their productivity reflecting economies to scale. Capacity plan alternative may include different size (different investment) & locations. All the costs involved in capacity planning are future costs & the time span may be long, a discounted cash flow (DCF) analysis is appropriate for comparing alternatives. DCF is based on investment & operating costs. 2. New products & risky situations. Capacity planning in case of new products requires an assessment of risks. The effect of the probability that risky events will occur must be accounted for. If the market is uncertain a probabilistic prediction of the market provides basic data. Suppose that we are planning future capacity for a product that is in the rapid development phase. The probability of optimistic demand = 0.25 The probability of expected demand = 0.50 The probability of pessimistic demand = 0.25 Alternatives of capacity expansion are: existing capacity 17000 items - Install 15000 units - Install 5000 units every year for three years. - No capacity addition. The above e.g. can be represented in the form of decision tree.

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$1,778,150

$ 1,588,800 $1,588,800 $ 2,459,300

$595,800 Install 5000 Units in 1989,1990 and 1991 $595,800 $ 2,749,000

$819,400 $ 261,350

Expected value of decision Installation of 15000 units Installation of 5000 units No capacity addition

= 1778150+1588800+1588800 = 4955750 = 2459300+595800+595800 = 3650900 = 2749000+819400+261350 = 3829750

Framework for analyzing capacity planning decision.

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1.Structuring alternatives. Capacity expansion involves extremely important strategic issues that must be addressed before the balance of the planning process can proceed. These issues involve existing industry capacity, where it is located, the nature & strength of competition, the status of the technology in the industry including the potential for influence on whether or not to pursue an expansion at all as well as on the structuring for alternatives for expansion. Given a ‘go’ signal for the capacity planning process, alternatives need to be structured around different locations that may have the competitive advantages, the process technology that can be used, & the nature of the product & its market. One of the outcomes will be in terms of the riskiness of the situation, with regard to both the product & its markets (mature or new & risky) & the anticipation of chance occurrences or developments usually involving technological choices.

2.Choice Of Criteria For Decision Capacity expansion invariably means the criteria of assets that have value over long periods. The building & the process equipment normally involve the largest assets of an enterprise, & since the alternatives may involve expenditures & revenues with different timings, present values should be used to place all of the monetary values on a common basis for comparison. But if we are dealing with risky situations that require decision-tree analysis, then probabilities must be taken into account, & the expected monetary values become the criteria.

3.Evaluation Of Alternatives & Decisions. Although the economic criteria are of great significance in the basic decision to expand capacity they may yield to qualitative differences in the selection of an alternative. Questions of location & timing may depend on qualitative criteria that can’t be reflected in the economic analysis. Competitor factors among the alternatives may be of extreme importance and may outweigh economic differences among the alternatives in the minds of the decision makers. As with the analysis of technological alternatives, decision makers can make trade-offs between economic & subjective values, thereby pricing the subjective advantages.

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UNIT II Chapter III Plant layout  Meaning of plant layout  Objectives of plant layout  Types of layout  Costs associated with layout  Techniques of plant layout

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MEANING OF PLANT LAYOUT Plant layout means the disposition of the various facilities (equipments, material, manpower etc.) within the areas of the site selected. Plant layout begins with the design of the factory building and goes up to the location and movement of work. All the facilities like equipment, raw material, machinery, tools, fixtures, workers etc. are given a proper place. In the words of James Lundy, “It identically involves the allocation of space and the arrangement of equipment in such a manner that overall cost are minimized”. According to MoNaughton Waynel, “A good layout results in comforts, convenience, appearance, safety and profit. A poor layout results in congestion, waste, frustration and inefficiency”. Plant layout is very complex in nature as it involves concept relating to such fields as engineering, architecture, economics and business administration. Hence a plant layout, with proper design, encompasses all production and service facilities and provides for the most effective utilization of men, with materials and machines constituting the process, is a master blue print for coordinating all operations.

Objectives of a Good Plant Layout The principal objective of a proper plant layout is to maximize the production at the minimum of the costs. This objective should be kept in mind while designing a layout for a new plant as well as while making the necessary changes in the exiting layout in response to change in management polices and processes and techniques of production with the production system, i.e. workers, supervisors and managers. If a layout is to fulfill this goal, it should be planned with the following clear objectives in mind. 1)

2) 3) 4) 5)

There is the proper utilization of cubic (i.e. length, width and height). Maximum use of volume available should be made. For example, conveyors can be run above head height and used as moving work in progress or tools and equipments can be suspended from the ceiling. The principle is particularly true in stores where goods can be stored at considerable height without inconvenience. Waiting time of the semi-finished products is minimized. Working conditions are safer, better (well ventilated rooms etc.) and improved Material handling and transportation is minimized and efficiently controlled. For this , one has to consider the movement distances between different work areas as well as the number of times such movements occur per unit period of time. The movements made by the worker are minimized. 37

6) 7) 8) 9) 10) 11) 12)

Suitable spaces are allocated to production centers. Plant maintenance is simpler. There is increased flexibility for changes in product design and for future expansion. It must be capable of incorporating, without major changes, new equipment to meet technological requirement or to eliminate waste. A good layout permits material to move through the plant at the desired speed with the lowest cost. There is increased productivity and better product quality with reduced capital cost. Boosting up employee morale by providing employee comforts and satisfaction. The work should be so arranged the there is no difficulty in supervision, coordination and control. There should be no ‘hiding-places’ into which goods can be mislaid. Goods – raw materials and ready stocks – must be readily observed at all times. It will reduce the pilferage of material and labour.

It should be noted here that the above stated objectives of plant layout are laudable in themselves; it is often difficult to reconcile all of them in a practical situation. And as such, the highest level of skill and judgment are required to be exercised. For this, close association between the entrepreneurs and experienced engineers is a must.

Types of Plant Layout There are three basic types of plant layout: (1) Functional or process layout, (2) Product or line layout, (3) Stationary layout. However the choice of one or the other type of layout depends upon the machine and techniques used in the production. (a)

(b)

Process Layout: It is also known as functional layout and is characterized by keeping similar machines or similar operation at one location (place). In other words, separate departments are established for each specialized operation of production and machines relating to that functions are assembled there. For example, all lathe machines will be at one place, all milling machines at another and so on. This type of layout is generally employed for industries engaged in job-order production and non-standardized products. The process layout may be illustrated in the Diagram given below. Receiving

Shipping Surface

Lathe

Milling

Deptt

Deptt

Packaging

Finishing

Assembling 38

inspection

F I

C

E

S

Advantages: 1)

2) 3) 4) 5) 6)

7)

Wide flexibility exits as regards allotment of work to equipments and workers. The production capacity is not arranged in rigid sequence and fixed rate capacity with line balancing. Alteration or change in sequence of operation can easily be made as and when required without upsetting the existing plant layout plan. Better quality product, because the supervisors and workers attend to one type of machine and operations. Variety of jobs, coming as different job orders make the work more interesting for workers. Workers in one section are not affected by the nature of operations carried out in another section. E.g. the rays of welding do not affect a lathe operator, as the two sections are quite separate. Like product layout, the breakdown of one machine does not interrupt the entire production flow. This type of layout requires lesser financial investment in machines and equipments because general-purpose machine, which are usually of low cost, are used and duplication of machine is avoided. Moreover, general-purpose machine do not depreciate or become obsolete as rapidly as specialized machines. It results in lower investment in machines. Under process layout, better and efficient supervision is possible because of specialization in operation.

Disadvantages: 1)

Automatic material handling is extremely difficult because fixed material handling equipment like conveyor belt is not possible to use. 2) Completion of same product takes more time. 3) Raw material has to travel larger distances for getting processed to finished food. This increases material handling and the associated costs. 4) It is not possible to implement the group incentive schemes on the basic of quantity of the product manufactured. 5) This type of layout requires more floor space than the product layout because a distinct department established for each operation. 6) Compared to line layout inventory investment are usually higher in case of process layout. It increases the need of working capital in the form of inventory.

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7)

Under process layout, cost of supervision is high because (i) the number of employees per supervisor is less that result in reduced supervisory span of control, and (ii) the work is checked after each operation.

c) Product Layout: it is also known as line (type) layout. It implies that various operations on a product are performed in a sequence and the machine are placed along the product flow line i.e. machines are arranged in the sequence in which a given product will be operated upon. This type of layout is preferred for continuous production i.e. involving a continuous flow inprocess material towards the finished product stage.

IN

OUT

Operation1

operation2

operation3

operation4

operation4

Advantages: i) ii)

iii) iv) v)

vi)

Automatic material handling, lesser material handling movement, times and cost. Product completes in lesser time. Since material is fed at one end of the layout and finished product is collected at the other end, there is no transportation of raw material backward and forward. It shortens the manufacturing time because it does not require any time-consuming interval transportation till the completion of the process of production. Line balancing may eliminate idle capacity. Smooth and continuous flow of work- This plant ensures steady flow of production with economy because bottlenecks or stoppage of work at different point of production is got eliminated or avoided due to proper arrangement of machine in sequence. Less in-process inventory- The semi-finished product or work-in-progress is the minimum and negligible under this type of layout because the process of production is direct and uninterrupted. Effective quality control with reduced inspection points -It does not require frequent changes in the machine set-up. Since production process is integrated and continuous, defective parts can easily be discovered and segregated. This makes inspection easy and economical. Maximum use of space due to straight production flows and reduced need of interim storing.

Disadvantages: i)

Since the specific product determines the layout, a change in product involves major changes in layout and thus the layout flexibility is considerably reduced.

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ii) iii) iv) v) vi) vii)

The pace or rate of working depends upon the output rate of the slowest machine. This involves excessive idle time for other machines if the production line is not adequately balanced. Machines being scattered along the line, more machines of each type have to be purchased as stand by, because if one machine in the line fails, it may lead to shut down of the complete production line It is difficult to increase production beyond the capacities of the production lines. As the entire production is the result of the joint effort of all operation in the line, it is difficult to implement individual incentive schemes. Since there is no separate department for various types of work, supervision is also difficult. Under this system, labour cost is high because (a)

(b) (c)

Absenteeism may create certain problems because every worker is specialist in his own work or he specializes on a particular machine .In order to avoid the bottleneck, surplus workers who are generalists and can be fitted on a number of machines will have to be employed; Monotony is another problem with the workers .By doing the work of repetitive nature along assembly line, they feel bored. They have no opportunity to demonstrate their talent; Noise, vibrations, temperature, moisture, gas etc. may cause health hazards .In this way, labour costs are high.

It is now quite clear from the above discussion that both the systems have their own merits and demerits. Advantages of one type of layout are generally the disadvantages of other type. Thus with a view to securing the advantage of both the systems a combined layout may be designed.

(c) Static Product Layout or Project Layout or Stationary Layout The manufacturing operations require the movements of men, machines, and materials, in the product layout and process layout generally the machines are fixed installations and the operators are static in terms of their specified workstations. It is only the materials, which move from operation to operation for the purpose of processing. But where the product is large in size and heavy in weight, it tends to be static e.g. ship building. In such a production system, the product remains static and men and machines move performing the operations on the product.

Advantages of stationery Layout: The advantages of this type of layout are as under: 1. Flexible: This layout is fully flexible and is capable of absorbing any sort of change in product and process. The project can be completed according to the needs of the customers and as per their specifications.

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2. Lower labour cost: People are drawn from functional departments. They move back to their respective departments as soon as the work is over. This is economical, if a number of orders are at hand and each one is in the different stage of progress. Besides, one or two workers can be assigned to a project from start to finish. Thus it reduces labour cost. 3. Saving in time: The sequence of operations can be changed if some materials do not arrive or if some people are absent. Since the job assignment is so long, different sets of people operate simultaneously on the same assignment doing different operations 4.Other benefits: (1) It requires less floor space because machines and equipment are in moving position there is no need of fixing them.

and

(2) This arrangement is most suitable way of assembling large and heavy products.

Disadvantages Of Stationery Layout: The disadvantages of this type of layout are: 1. Higher capital investment: As compared to product or process layout, capital investment is higher in this type of layout. Since a number of assignments are taken, investments in materials, men and machines are made at higher cost. 2. Unsuitability: This type of layout is not suitable for manufacturing or assembling small products in large quantities. It is suitable only in case where the product is big or the assembling process is complex.

Factors influencing plant layout The following are some important factors, which influence the planning of effective layout to a significant degree. 1) Nature of the product: The nature of the product to be manufactured will significantly affect the layout of the plant. Stationary layout will be most suitable for heavy products while line layout will be best for the manufacture for the light products because small and light products can be moved from one machine to another very easily and, therefore, more attention can be paid to machine locations can be paid to machine locations and handling of materials. (2) Volume of production: Volume of production and the standardization of the product also affect the type of layout. If standardized commodities are to be manufactured on large scale, line type of layout may be adopted. (3) Basic managerial policies and decisions: The type of layout depends very much on the decisions and policies of the management to be followed in producing the commodity with regard to the size of plant, kind and quality of the product, scope for expansion to be provided for, the extent to which the plant is to be integrated, amount of stocks to be carried at anytime, the kind of employee facilities to be provided etc. 42

(4) Nature of plant location: The size shape and topography of the site at which the plant is located will naturally affect the type of layout to be followed in view of the maximum utilization of the space available .For e.g., if a site is near the railway line the arrangement of general layout for receiving and shipping and for the best flow of production in and out the plant may be made by the side of the railway lines .If space is narrow and the production process is lengthy, the layout of plant may be arranged on the land surface in the following manner:

IN IN

OUT

OUT

(5) Type of industry process: This is one of the most important factors influencing the choice of type of plant layout. Generally the types of layout particularly the arrangement of machines and work centers and the location of workmen vary according to the nature of the industry to which the plant belongs. For the purpose of lay out, industry may be classified into two broad categories: (i) Intermittent and (ii) continuous. Intermittent type of industries is those, which manufacture different component or different machines. Such industries may manufacture the parts, when required according to the market needs. Examples of such industries are shipbuilding plants. In this type of industry functional layout may be the best. The second type of industry in ‘continuous industry. in this type of industry raw material are fed at one end and the finished goods are received at another end. A continuous industry may either be analytical or synthetic . A analytical industry breaks up the raw material into several parts during the course of production process or changes its form, e.g. oil and sugar refineries. A synthetic industry on the other hand mixes the two or more materials to manufacture one product along with the process of production or assembles several parts to get finished product. Cement and automobiles industries are the examples of such industry. Line layout is more suitable in continuous process industries. 6. Types of methods of production: Layout plans may be different according to the method of production proposed to be adopted. Any of the following three methods may be adopted for production- (1) Job order production, (2) batch production, and (3) mass production. Under job production goods are produced according to the orders of the customers and therefore, specification vary from customer to customer and the production cannot be standardized. The machines and equipment can be arranged in a manner to suit the need of all types of customers. Batch production carries the production of goods in batches or group at intervals. In this type of manufacturing the product is standardized and production is made generally in anticipation of sales. In such cases functional or process layout may be adopted. In case of mass production of standardized goods, line layout is most suitable form of plant layout.

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7. Nature of machines:Nature of machines and equipment also affects the layout of plants. If machines are heavy in weight or create noisy atmosphere, stationery layout may reasonably be adopted. Heavy machines are generally fixed on the ground floor. Ample space should be provided for complicated machines to avoid accidents. 7. Climate:Sometimes, temperature, illumination and air are the deciding factors in the location of machines and their establishments. For example, in lantern manufacturing industry, the spray-painting room is built along the factory wall to ensure the required temperature control and air expulsion and the process of spray painting may be undertaken. 9.Nature of material: Design and specification of materials, quantity and quality of materials and combination of materials are probably the most important factors to be considered in planning a layout. So, materials storage, space, volume and weight of raw materials, floor load capacity, ceiling height ,method of storing etc. should be given special consideration. This will affect the space and the efficiency of the production process in the plant. It will facilitate economic production of goods and prompt materials flow and soundly conceived materials handling system. 10. Type of machine: Machines and equipment may be either general purpose or special purpose. In addition certain tools are used. The requirements of each machine and equipment are quite different in terms of their space; speed and material handling process and these factors should be given proper consideration while choosing out a particular type of layout. This should also be considered that each machine and equipment is used to its fullest capacity because machines involve a huge investment. For instance, under product layout, certain machines may not be used to their full capacity so care should be taken to make full use of the capacity of the machines and equipment. 12.Human factor and working conditions:Men are the most important factor of production and therefore special consideration for their safety and comforts should be given while planning a layout, specific safety items like obstructionfree floor, workers not exposed to hazards, exit etc. should be provided for. The layout should also provide for the comforts to the workers such as provision of rest rooms, drinking water and other services etc. sufficient space is also to be provided for free movement of workers. 13. Characteristics of the building: Shape of building, covered and open area, number of storeys, facilities of elevators, parking area and so on also influence the layout plan. In most of the cases where building is hired, layout is to be adjusted within the spaces available in the building. Although minor modification may be done to suit the needs of the plants and equipment. But if any building is to be constructed, proper care should be given to construct it according to the layout plan drawn by experts. Special type of construction is needed to accommodate huge or technical or complex or sophisticated machines and equipment.

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Costs Associated With Plant Layout The costs associated with a decision on plant layout are: Cost of movement of material from one work area to another. Cost of space. Cost of production delay, if any, which are indirect costs. Cost of spoilage of material, if any, when the materials are staged or stored in condition which determine the quality of the material  Cost of labor dissatisfaction and health risks  Cost of changes required, if the operational conditions changed in the future. This is the longterm cost. A good layout should minimize all these costs put together.    

Techniques of plant layout In designing or improving the plan of plant layout, certain techniques or tools are developed and are in common use today. The techniques or tools are as follows: 1)Charts and diagrams: In order to achieve work simplification, production engineers make use of several charts and diagrams for summarizing and analyzing production process and procedure. These include a)Operation process chart: It subdivides the process into separate operations and inspection. When a variety of parts and products are manufactured which follow a different path across several floor areas, an operation process chart may be necessary for the important material items or products. The flow lines of the charts indicate the sequence of all operation in the manufacturing cycle. Flow process chart: This chart is the graphic summary of all the activities taking place on the production floor of an existing plant. By preparing this type of chart, it can be found out as to where operations can be eliminated , rearranged, combined, simplified or subdivided for greater economy. Process flow diagram: The diagram is both supplement and substitute of process flow chart. It helps in tracing the movement of material on a floor plan or layout drawing. A diagram may be drawn to scale on the original floor plan to show the movement of work. It is a good technique to show long materials hauls and backtracking of present layouts, thereby indicating how the present layout may be improved. Colored lines can show the flow of several standards products. Layouts, thereby indicating how the present layout may be improved. Colored lines can show the flow of several standard products.

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This diagram can be used to analyze the effectiveness of the arrangement of the plant activities, the location of specific machines, and the allocation of space. It shows how a more logical arrangement and economical flow of work can be devised. (2) Machines data card: This card provides full information necessary for the placement and layout of equipment. The cards are prepared separately for each machine. The information generally given on these cards include facts about the machine such as capacity of the machines, scape occupied, power requirements, handling devices required and dimensions. (3) Templates: Template is the drawing of a machine or tool cut out from the sheet of paper. Cutting to scale shows the area occupied by a machine. The plant layout engineer prepares a floor plan on the basis of reel vent information made available to him. The template technique is an important technique because (i) it eliminates unnecessary handlings, (ii) minimize backtracking of materials, (iii) it makes the mechanical handling possible, (iv) it provides a visual picture of proposed or existing plan of layout at one place, (v) it offers flexibility to meet future changes in the production requirements. (4) Scale models: Though the two-dimensional templates are now in extensive use in the fields of layout engineering but it is not much use to executives who cannot understand and manipulate them .One important drawback of template technique is that it leaves the volume, depth, height and clearance of the machines to the imaginations of the reader of the drawing. These drawbacks of the template technique have been removed through the development of miniature scale models of machinery and equipment cast in metal. With scale models, it has now become possible to move tiny figures of men and machines around in miniature factory .The miniature machines and models of material handling equipment are placed in a miniature plant and moved around in pawn on a chessboard. (5) Layout drawings: Completed layouts are generally represented by drawings of the plant showing wall, columns, stairways, machines and other equipments, storage areas and office areas. The above techniques and tools are used for the planning of layout for the new plant.

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UNIT II

Chapter IV Production system  Meaning  Types of production system  Evaluation of various production systems

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TYPES OF PRODUCTION SYSTEM According to Webster, “System is a regular interacting inter-dependent group of items forming a unified whole”. A system may have many components and variation in one component is likely to affect the other components of the system e. g. change in rate of production will affect inventory, overtime hours etc. Production system is the framework within which the production activities of an organization are carried out. At one end of a system are inputs and at the other output. Input and output are linked by certain process or operations or activities imparting value to the inputs. These processes, operations or activities may be called production system. The nature of production system may differ from company to company or from plant to plant in the same firm. ELEMENTS OF PRODUCTION SYSTEM (1) Inputs (2) Conversion process (3) Outputs (4) Storage (5) Transportation (6) Information TYPES OF PRODUCTION SYSTEMS There are two main types of production systems (1) Continuous system (2) Intermittent system (1) FLOW OR CONTINUOUS SYSTEM : According to Buffa, “Continuous flow production situations are those where the facilities are standardised as to routing and flow since inputs are standardised. Therefore a standard set of processes and sequences of process can be adopted”. Thus continuous or flow production refers to the manufacturing of large quantities of a single or at most a very few varieties of products with a standard of processes and sequences. The mass production is carried continuously for stock in anticipation of demand. CHARATERISTICS: (1) The volume of output is generally large (mass production) and goods are produced in anticipation of demand.

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(2) The product design and the operations sequence are standardised i.e. identical products are produced. (3) Special purpose automatic machines are used to perform standardized operations. (4) Machine capacities are balanced so that materials are fed at one end of the process and finished product is received at the other end. (5) Fixed path materials handling equipment is used due to the predetermined sequence of operations. (6) Product layout designed according to a separate line for each product is considered. MERITS: (1) The main advantage of continuous system is that work in progress inventory is minimum. (2) The quality of output is kept uniform because each stage develops skill through repetition of work. (3) Any delay at any stage is automatically detected. (4) Handling of materials is reduced due to the set pattern of production line. Mostly the materials are handled through conveyer belts, roller conveyers, pipe lines, overhead cranes etc. (5) Control over materials, cost and output is simplified. (6) The work can be done by semi- skilled workers because of their specialisation. DEMERITS: Continuous system, however, is very rigid and if there is a fault in one operation the entire process is disturbed. Due to continuous flow, it becomes necessary to avoid pilling up of work or any blockage on the line. Unless the fault is cleared immediately, it will force the preceding as well as the subsequent stages to be stopped. Moreover it is essential to maintain stand-by equipments to meet any breakdowns resulting in production stoppages. Thus investments in machines are fairly high.

CONTINUOUS PRODUCTION IS OF THE FOLLOWING TYPES: (A) MASS PRODUCTION : Mass production refer to the manufacturing of standardized parts or components on a large scale. Mass production system offers economies of scale as the volume of output is large. Quality of products tend be uniform and high due to standardized and mechanization. In a properly designed and equipped process, individual expertise plays less prominent role. (B) PROCESS PRODUCTION :

Production is carried on continuously through a uniform

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and standardized sequence of operations highly sophisticated and automatic machines are used. Process production is employed in bulk processing of certain materials. The typical processing industries are fertilizers plants, petrochemical plants and milk diaries which have highly automated systems and sophisticated controls. They are not labour–intensive and the worker is just an operator to monitor the system and take corrective steps if called for. On the basis of the nature of production process, flow production may be classified in Analytical And Synthetic Production . In Analytical Process production, a raw material is broken into different products e. g. crude oil is analysed into gas, naptha, petrol etc. Similarly, coal is processed to obtain coke, coal gas , coaltar etc.. Synthetic process of production involves the mixing of two or more materials to manufacture a product for instance, lauric acid, myristic acid, stearic acid are synthesised to manufature soap. (C) Assembly lines : Assembly lines a type of flow production which is developed in the automobiles industry in the U.S.A. A manufacturing unit prefers to develop and employ assembly line because it helps to the efficiency of production. In an assembly line, each machine must directly receive materials from the previous machine and pass it directly to the next machine. Machine and equipment should be arranged in such a manner that every operator has a free and safe access to each machine. Space should be provided for free movement of fork lifts, trucks etc. which deliver materials and collect finished products. (ii) INTERMITTENT PRODUCTION SYSTEM ACCORDING TO BUFFA, “Intermittent situations are those where the facilities must be flexible enough to enough to handle a variety of products and sizes or where the basic nature of the activity imposes change of important characteristics of the input (e.g. change in the product design). In instances such as these, no single sequence pattern of operation is appropriate, so the relative location of the operation must be a compromise that is best for all inputs considered together”. In the industries following the intermittent production system, some components may be 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 consumer demand, there are problems to be met in scheduling, forecasting control and coordination. CHARACTERISITICS : (1) (2) (3) (4)

The flow of production is intermittent, not continuous. The volume of production is generally small. A wide variety of products are produced. General purpose, machines and equipments are used so as to be adaptable to a wide variety of operations. (5) No single sequence of operations is used and periodical adjustments are made to suit different jobs or batches.

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(6) Process layout is most suited. Intermittent system is much more complex than continuous production because every product has to be treated differently under the constraint of limited resources. Intermittent system can be effective in situation which satisfy the following conditions: (1) The production centers should be located in such a manner so that they can be handle a wide range of inputs. (2) Transportation facilities between production centers should be flexible enough to accommodate variety of route different inputs. (3) It should be provided with necessary storage facility. Intermittent production may be of two types. (A) JOB PRODUCTION : job production involves the manufacturing of single complete unit with the use of a group of operator and process as per the customer’s this is a “ special order” type of production. Each job production or product is different from the other and no repetition is involved. The product is usually costly and non- standardized. Customers do not make demand for exactly the same product on a continuing basis and therefore production become intermittent. Each product is a class by itself and constitute a separate job for production process. Shipbuilding, electric power plant dam construction etc. are common examples of job production CHARACTERISTICS : (1) The product manufacture is custom-made or non –standardized. (2) Volume of output is generally small. (3) Variable path materials handling equipment are used. (4) A wide range of general purpose machines like grinders, drilling, press, shaper etc is used . MERITS : it is flexible and can be adopted easily to change in product design. A fault in one operation does not result into complete stoppages of the process. Beside it is cost effective and time- effective since the nature of the operation in a group are similar there is reduced materials handling since machines are close in a cell. The waiting period between operation is also reduced. This also results in a work- in- progress inventrory. DEMERITS: Job shop manufacturing is just most complex system of production e. g. in building a ship thousand of individual parts must be fabricated and assemble. A complex schedule of activity is required to ensure smooth flow of work with out any bottleneck. Raw materials and workin-progress inventories are high due to uneven and irregular flow of work. Work loads are unbalanced, speed of work is slow and unit costs are high.

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(B) BATCH PRODUCTION : it is defined as, “ The manufacture of a product in small or large bathes or lots at intervals by a series of operations, each operation being carried out on the whole batch before any subsequent operation is performed’ the batch production is mixture of mass production and job production and job production under it machines turn out different product at intervals, each product being produced for comparatively short tome using mass production methods. Both job production and batch production are similar in nature, except that in batch production the quantity of product manufacture is comparatively large. DEMERITS : work-in-progress inventory is high and large storage space is required . due to frequent changes in product design no standard sequence of operation can be used. Machine set-ups and tooling arrangements have to be changed frequently. The main problem in batch production is ideal time between one operation and other the work has to wait to until a particular operation is carried out on the whole batch. COMPARISON OF DIFFERENT PRODUCTION SYSTEM As we have discussed various system and sub-system in detail in the above lines, we can now make a comparative study of them as follows. (1) MANUFACTURING COST : Cost of production per unit is lowest in process production while it is highest in job production because large scale continuous production is carried out under process production. Unit cost in mass production is higher while it is lower than the batch production or job production. (2) SIZE AND CAPITAL INVESTMENT : as stated earlier , the scale of operation is small in job production, medium in batch production, large in mass production and very large in process production. Hence the size of capital investment different from system. Process production calls for the higher investment while mass production requires lesser amount of capital investment . it is lower in case of job production and comparatively higher in batch production. (3) FLEXIBILITY IN PRODUCTION : in case of in demand of the product, the production facilities may be adjust very shortly with out increasing much expenses under the system of job or batch production . But both the sub-system of continuous production system i.e, mass production or process production employ single purpose machine in their manufacturing process. They can not adjust their production facilities so quickly and easily as is possible in job or batch production where general purpose machines are used (4) REQUIRED TECHNICAL ABILITY : both job and batch production require high skilled technical foreman and other executives . but under mass production for process production systems, managerial ability plays plays an important role because it require higher ability for

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planning and coordinating several functions in mass and process production than in the case of job and batch production. (6) ORGANISATIONAL STRUCTURE : mostly functional organization is adopted in case of job and batch production systems. On the other hand , divisional organization is preferred in mass product process production system due to the greater emphasis for centralization. (7) JOB SECURITY : job and batch system of production do not provide and type of job security to workers due to their intermittent character during odd times, workers particularly unskilled worker are thrown out of job. On the contrary, mass and process production systems provide greater job security to worker because production operation are carried out continuously in anticipation of stable and continuous demand of the product. (8) INDUSTRIALS APPLICATION : the application of different system is suitable in different industries depending upon the nature of work. The mechanisum of job production applies in products of construction and manufacturing industries like building , bridges special purpose machines etc. batch production is mostly used in mechanical engeering and consumer-goods industries like cotton, jute , machine tools , shoe-making etc. mass production is found in automobiles, sugar refining, refrigerators , electricals goods etc. process production is most appropriate in chemical , petroleum , milk processing industries etc. Thus, a comparative view of the different system of production reveals that no one system is suitable for all of different and each system is different in itself and must be studied with reference to the nature of industry.

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UNIT II

Chapter V Material handling system  Factors & principles of material handling system  Types of material handling equipment

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MATERIAL HANDLING SYSTEMS According to ‘American Handling Society’ Materials Handling is the art and science involving the movement, packing and storing of substances in any form’.

Material Handling includes: 1. 2. 3. 4. 5.

Lifting, moving, dropping, positioning, holding, releasing, stacking etc. Single or in lot movement. Vertical, horizontal or combination of both. Fluid, semi-fluid and discrete items. Attribute to 20% of production cost.

Analysis of material handling problem 1. The reduction of material handling cost 2. Collection of factual data e.g.- type, weight of goods, transportation area, type of material handling 3. Analyzing the data so that cost advantage can be taken 4. Application of principles of material handling 5. The formulation of solution

Factors affecting ‘material handling’1. 2. 3. 4.

Type of product- bulk, shape, weight, fragility, liquidity etc. Plant layout- sequence of movement of materials depends on layout Type of production system Factory building- Floor strength, ceiling heights, type and strength of roofs, door locations and sizes. 5. Production planning and control- Routing and scheduling are closely related to material handling. 6. Packaging 55

7. Material handling equipment- Available and proposed

Principles of material handling 1. Least movement 2. Type of each move should be minimized 3. Distance of each move should be short route 4. Movement in lots rather than on individual basis 5. Gravity should be used 6. Rehandling and back tracking should be avoided 7. Appropriate material handling which is safe, efficient and flexible should be used, 8. Material handling service should not interrupt production flow 9. Safety of people 10. Provision of stand-by facilities 11. Repair and maintenance-periodically 12. Periodical review of material handling system

TYPICAL FLOW PATTERN OF MATERIAL

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Types of equipment1. 2. 3. 4. 5. 6. 7.

Cranes and Hoists Conveyors Chutes Trucks, Tractors Rails Rope ways Pipelines

Features of good material handling equipment 1. 2. 3. 4. 5. 6.

Minimizes movement of material Avoids unproductive handling Reduces idle machine capacity Reduces factory hazards Effective production control Better customer services i. Reduced operating cost ii. Better quality of products iii. Timely production

Types of material handling systems The material handling systems can be classified according to the type of handling equipment used, type of material handled and the methods ,need or function performed. 1. Equipment Oriented Systems depending upon the type of equipment used are:a) b) c) d) e) f)

Overhead systems Conveyor systems Tractor transfer system Fork-lift truck and pallet truck system Industrial truck system Underground truck system

2. Material Oriented Systems Consisting of:a) Unit Handling Systems b) Bulk Handling System c) Liquid Handling System

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3. Method Oriented Systems are of following types:a) b) c) d)

Manual System Mechanized or automated system Job Shop handling system Mass-production handling system

4. Function Oriented Systems such as:a) Transportation Systems b) Transferring Systems c) Elevating Systems Steps to be followed in the selection and design of material handling system. 1. 2. 3. 4. 5. 6. 7.

Identification of the appropriate Systems Review of design criteria and objectives of handling systems Collection of data regarding flow pattern and flow requirement Identification of activity relationship between departments Determination of space requirement and establishment of material flow pattern Analysis of material and building characteristic Preliminary selection of basic handling system and generation of alternative system considering feasibility of mechanization and equipment capabilities 8. Evaluation of alternatives with respect to optimal material flow, utilizing gravity minimum cost, flexibility, case of maintenance and capacity utilization 9. Selection of the best suitable alternative system and checking it for compatibility with the layout 10. Specification of the system 11. Procurement of the equipment and installation of the system.

Types of materials handling equipment Conveyors These are gravity or powered devices, commonly used for moving loads from point to point over fixed paths. The various types of conveyors are:a) Belt conveyor- Motor driven belt, usually made of rubberized fabric or metal fabric on a rigid frame. b) Chain Conveyor- Motor driven chain that drags material along a metal slide base. c) Roller conveyor- Boxes, large parts or unit loads roll on top of a series of roller mounted on a rigid frame

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d) Pneumatic conveyor:- High volume of air flows through a tube, carrying material along with the air flow.

Cranes, Elevators and Hoists These are overhead devices used for moving varying loads intermittently between points within an area, fixed by supporting and binding rails. 1. Graves are devices mounted on overhead rails or ground level wheels or rails. 2. Elevator are a type of graves that lift material usually between floors of building 3. Hoists are devices, which move materials vertically and horizontally in a limited area.

Industrial Trucks These devices are used for moving mined or uniform loads intermittently over variable paths. They are electric, diesel, gasoline or liquefied petroleum, gas-powered vehicle equipped with lead, forklift truck, pallet trucks, tractor with trailers, hand trucks and power trolleys.

Miscellaneous Handling Equipment 1. Pipelines, which are closed tubes that transport liquids by means of pumps or gravity 2. Automatic transfer devices, which automatically grasp material, hold them firmly while operation are being performed and move them to other location. 3. Automated guided vehicle are the devices, which do not require operators and provide a great deal of flexibility in the path they travel and the function they perform. 4. Industrial robots are the devices, which has a movable arm like projection with a gripper on the end that can perform a variety of repetitive tasks.

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UNIT III

Chapter I Aggregate planning     

Meaning Characteristics and objectives Linear programming model Transportation model H.M.M.S MODEL

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Aggregate Planning 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 e.g. aggregate quantities of thousands of litres of paint , or tons of fabrication work , or number of automobiles etc. Aggregate planning is made within the broad framework of the long-range plan. Usually the planning horizon for such plan is from a month to a year . The physical plant and equipment capacity would be fixed over this planning horizon . Therefore the sales orders have to be met by strategies like : 1. Overtime 2. Additional temporary workers . 3. Inventory . 4. Sub- contracting . 5. Having backlog of orders . 6. Smoothening of demand . 7. Turning down some sales orders . Each of these strategies has a cost associated with it . The marginal cost of overtime is easy to estimate , whereas the costs of undertime are not easy to determine . The hiring costs include the costs of selection , the costs of training and the cost of maintaining additional records . There are also costs associated with learning on the job of a newly hired employee. Costs of inventory include the cost of capital for carrying the inventory , the cost of obsolescence , taxes and insurance etc. Stock- out costs are cost due to loss of goodwill and loss of sales of the customer . The cost of sub- contracting is the amount by which the subcontracting costs is greater than the manufacturing cost at the higher level of production . Characteristics of aggregate planning: •

Considers a "planning horizon" from about 3 to 18 months, with periodic updating

•

Looks at aggregate product demand, stated in common terms

•

Looks at aggregate resource quantities, stated in common terms

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•

Possible to influence both supply and demand by adjusting production rates, workforce levels, inventory levels, etc., but facilities cannot be expanded.

Production Plan (manufacturing aggregate plan): A managerial statement of the period-by-period (time-phased) production rates, work-force levels, and inventory investment, given customer requirements and capacity limitations. Staffing Plan (service aggregate plan): A managerial statement of the period-by-period staff sizes and labour-related capacities, given customer requirements and capacity limitations.

Objectives of Aggregate Planning Objective of aggregate planning frequently is to minimize total cost over the planning horizon. Other objectives which should be considered: •

maximize customer service

•

minimize inventory investment

•

minimize changes in workforce levels

•

minimize changes in production rates

•

maximize utilization of plant and equipment

Aggregate Planning Strategies Active strategy: •

Attempts to handle fluctuations in demand by focusing on demand management

•

Use pricing strategies and/or advertising and promotion

•

Develop counter-cyclical products

•

Request customers to backorder or advance-order

•

Do not meet demand

Passive strategy (reactive strategy): •

Attempts to handle fluctuations in demand by focusing on supply and capacity management

•

Vary work force size by hiring or layoffs

•

Vary utilization of labour and equipment through overtime or idle time

•

Build or draw from inventory

•

Subcontract production

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•

Negotiate cooperative arrangements with other firms

•

Allow backlogs, back orders, and/or stockouts

Mixed strategy: •

Combines elements of both an active strategy and a passive (reactive) strategy

•

Firms will usually use some combination of the two

Linear Programming Model It is the most common model. Linear Programming models can be solved manually if they are simple enough or by means of computer packages if they are complex. By solving a linear programming model, we can get a period wise allocation of our regular time capacities in order to meet the sales forecast or the requirements forecast in the most economical fashion .

Transportation Problem Model E.H. Bouman has given a transportation problem approach to aggregate planning . The model considers a combination of only three strategies : 1. Regular time production . 2. Overtime production . 3. Inventory.

H.M.M.S Model The H.M.M.S. model , (C.C. Hold , F. Modiglani , J.Muth, H.Simon ) uses quadratic functions for the different costs such as overtime , inventory , hiring and lay-off , backlog etc. For this model the following costs are considered : 1. Costs relating to production level with optimal workforce . 2. Hiring costs 3. Layoff costs 4. Overtime costs . 5. Undertime costs . 6. Inventory holding costs. 7. Back- order costs. Finding Optimal Solutions Using Linear Programming - Aggregate planning problems can be solved optimally using linear programming (LP). - Given the constraints on requirements, production capabilities, allowed workforce changes, overtime and subcontracting limits plus all relevant costs LP will find an optimal solution to the problem which minimizes total costs.

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UNIT III

Chapter II Production planning and control  Meaning and objectives of production planning  Production planning an integral part of corporate plan  Meaning of production control  Objectives of production control  Production planning and control(PPC)  PPC for shop production  PPC for mass production  Sequencing or prioritisation

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Production Planning And Control Planning and control are basic managerial functions which are essential to every organized activity. Proper planning and control of manufacturing activities or the production system is equally essential for efficient and economical production. Economy and productivity are to a large extent directly proportional to the thoroughness with which the planning and control functions are performed. In a modern enterprise, production is a complex system and steps must be taken to ensure that goods are produced in the right quantity and quality, at the right time and place and by the most efficient methods possible. This is the task of production planning and control.

Production planning Production planning is concerned with deciding in advance what is to be produced, when to be produced, where to be produced and how to be produced. It involves foreseeing every step in the process of production so as to avoid all difficulties and inefficiency in the operation of the plant. Production planning has been defined as the technique of forecasting or picturing ahead every step in a long series of separate operations, each step to be taken in the right place, of the right degree, and at the right time, and each operation to be done at maximum efficiency. In other words, production planning involves looking ahead, anticipating bottlenecks and identifying the steps necessary to ensure smooth and uninterrupted flow of production. It determines the requirements for materials, machinery and man-power; establishes the exact sequence of operations for each individual item and lays down the time schedule for its completion.

Objectives of Production Planning The basic objectives of production planning are as under:(i) On the basis of the sales forecast and its engineering analysis, to estimate the kind of the resources like men, materials, machines, methods etc. in proper quantities and qualities. It also estimates when and where these resources will be required so that the production of the desired goods is done most economically.

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(ii)

It also aims to make all necessary arrangement so that the production targets as set in the production budget and master schedules are reached. While attaining these targets, adjustments are made for the fluctuations in the demand.

For an effective planning of production activities, the executives concerned must have complete information regarding the following:(i)

Engineering data including complete analysis of the product to be manufactured ,the operations, processes and methods through which each component or class of product must pass, the nature of inspection required, and the method of assembly. (ii) Machine analysis giving full information regarding speeds of all available machines and their maximum capacity to perform certain operations, and the rate of output per day, week or month, and the maximum plant capacity per day for each process or operation. (iii) The various types and classes of tools and equipment required of production. (iv) Material analysis giving full information as to the type, quality and quantity of the raw material to be used in each process or operation. Also, information as to raw materials in stores, how much are on order, and how much are a located or reserved for current orders. (v) The characteristics of each job and the degree of skill and personnel qualifications required for the effective performance of each such job. (vi) Information relating to power production and consumption, internal transport and material handling service. (vii) Job analysis giving information as to what methods of operation would yield uniformity of output, ease in production and reduction in costs. (viii) Information as to the customers orders on hand, and the delivery for customers, and what for stock purpose. It is the job of the production department to arrange for the order in which the work will be done the routing and scheduling of work, and determine what machines tools, workplaces materials and operatives should do the work. A balanced production planning would tend to increase operating efficiency by stabilizing productive activities, facilitate selling and customer service, and help reduce production cost by providing reliable basis for investment in raw materials and tools. It would promote fuller utilization of plant, equipment and labour by controlling all time and efforts essential in manufacturing. Levels of Production Planning Production planning can be done at three levels namely Factory Planning, Process Planning and Operation Planning which are as follows: (i) Factory Planning: At this level of planning the sequence of work/ tasks is planned in terms of building machines and equipment required for manufacturing the desired goods and services. The relationship of workplaces in terms of departments is also planned at this stage taking into consideration the space available for the purpose. (ii) Process Planning: There are many operations involved in factory planning for transforming the inputs into some desired end product. In process planning these

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(iii)

operations are located and the sequence of these operations in the production process is determined. Plans are also made for the layout of work centers in each process. Operation Planning: It is concerned with planning the details of the methods required to perform each operation viz. selection of work centers, designing of tools required for various operations. Then the sequences of work elements involved in each operation are planned. Specifications about each transfer, work centers, nature of tools required and the time necessary for the completion of each operation are prescribed.

Production Control All organizations irrespective of size, use production control to some degree. In small organizations, the production control may be performed by one person; but in large complex industries the production control department is normally well-organised and highly specialized. Production control presupposes the existence of production plans, and it involves the use of various control techniques to ensure production performance as per plans. Co-ordinating men and materials and machines is the task of production control. Production control may be defined as “the process of planning production in advance of operations; establishing the exact route of each individual item, part of assembly; setting and finishing dates for each important item, assembly and the finished products, and releasing the necessary orders as well as initiating the required follow-up to effectivate the smooth functioning of the enterprises.” According to Henry Fayol, production control is the art and science of ensuring that all which occurs is in accordance with the rules established and the instructions issued”. Thus, production control regulates the orderly flow of materials in the manufacturing process from the raw material stage to the finished product. Production control aims at achieving production targets, optimum use of available resources, increased profits through productivity, better and more economic goods and services etc. An effective production control system requires reliable information, sound organization structure, a high degree of standardization and trained personnel for its successful operation. A sound production control system contributes to the efficient operation of plant. In terms of manufacturing customer’s orders, production control assures a more positive and accurate completion and delivery date. Delivering an order on time is obviously important to the customer and to the development of customer goodwill. Production control also brings plan and order to chaotic and haphazard manufacturing procedures. This not only increases the plant efficiency but also makes it a more pleasant place in which to work. Most people recognize that employees prefer to work and do better work under conditions of obvious control and plan. Morale may be considerably improved.. Effective production control also maintains working inventories at a minimum, making possible a real saving in both labour and material investment. Thus, good production control helps a company operate and produce more efficiently and achieve lowest possible costs.

Objectives of Production Control The success of an enterprise greatly depends on the performance of its production control department. The production control department generally has to perform the following functions: (i) Provision of raw material, equipment, machines and labour. 67

(ii) (iii)

To organize production schedule in conformity with the demand forecasts. The resources are used in the best possible manner in such a way that the cost of production is minimized and delivery date is maintained. (iv) Determination of economic production runs with a view to reduce setup costs. (v) Proper co-ordination of the operations of various sections/departments responsible for production. (vi) To ensure regular and timely supply of raw material at the desired place and of prescribed quality and quantity to avoid delays in production. (vii) To perform inspection of semi-finished and finished goods and use quality control techniques to ascertain that the produced items are of required specifications. (viii) It is also responsible for product design and development. Thus the fundamental objective of production control is to regulate and control the various operations of production process such a way that orderly flow of material is ensured at different stages of the production and the items are produced of right quality, in right quantity, at the right time with minimum efforts and cost. Levels of Production Control Production control starts with some particular goal and formulation of some general strategy for the accomplishment of desired objectives. There are three levels of production control namely programming, ordering and dispatching. Programming plans the output of products for the factory as a whole. Ordering plans the output of components from the suppliers and processing departments. Dispatching considers each processing department in turn and plans the output from the machine, tools and other work centers so as to complete the orders by due date. Factors Determining Production Control Operations The nature of production control operations varies from organization to organization. The following factors affect the nature and magnitude of production control methods in an organization. (i) Nature of production: In job-oriented manufacturing, products and operations are designed for some particular order which may or may not be repeated in future. Hence production usually requires more time, whereas in a continuous manufacturing system inventory problems are more complex but control operations are rather simple due to fixed process. In mixed stock and custom manufacturing systems the problem of control is further complicated due to simultaneous scheduling of combined process. (ii) Nature of operations/activities: In intermittent manufacturing system the operations are markedly varied in terms of their nature, sequence and duration. Due to this the control procedure requires continuous modifications and adjustments to suit the requirements of each order. (iii) Magnitude of operations: Centralised control secures the most effective co-ordination but as an organization grows in size, decentralization of some production control functions becomes necessary. The degree to which the performance of an activity should be decentralized depends upon the scope of operations and convenience of their locations.

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Production planning and control Planning and control are interrelated and interdependent. Planning is meaningless unless control action is taken to ensure the success of the plan. Control also provides information feedback which is helpful in modifying the existing plans and in making new plans. Similarly, control is dependent on planning as the standards of performance are laid down under planning. Therefore, production and control should be considered an integrated function of planning to ensure the most efficient production and regulation of operations to execute the plans successfully. Production planning and control may be defined as the direction and coordination of the firm’s material and physical facilities towards the attainment of pre-specified production goals in the most efficient available way .It is the process of planning production in advance of operations, establishing the exact route of each individual item, part or assembly, setting starting and finishing dates for each important item or assembly and finished products, and releasing the necessary orders as well as initiating the required follow up to effectuate the smooth functioning of the enterprise. Thus, production planning and control involves planning, routing, scheduling, dispatching and expediting to coordinate the movements of materials, machines and manpower as to quantity, quality, time and place. It is based upon the old adage of “first plan your work and then work your plan”.

Objectives of Production Planning and Control The main objective of production planning and control is to ensure the coordinated flow of work so that the required number of products are manufactured in the required quantity and of required quality at the required time at optimum efficiency. In other words, production planning and control aims at the following purposes: (i)

(ii)

(iii)

(iv) (v) (vi)

Continuous Flow of Production: It tries to achieve as smooth and continuous production by eliminating successfully all sorts of bottlenecks in the process of production through well-planned routing and scheduling requirements relating to production work. Planned Requirements of Resources: It seeks to ensure the availability of all the inputs i.e. materials, machines, tools, equipment and manpower in the required quantity, of the required quality and at the required time so that desired targets of production may be achieved. Co-ordinated work Schedules: The production activities planned and carried out in a manufacturing organization as per the master schedule. The production planning and control tries to ensure that the schedules to be issued to the various departments/units/supervisors are in co-ordination with the master schedule. Optimum Inventory: It aims at minimum investment in inventories consistent with continuous flow of production. Increased Productivity: It aims at increased productivity by increasing efficiency and by being economical. This is achieved by optimizing the use of productive resources and eliminating wastage and spoilage. Customer Satisfaction : It also aims at satisfying customers’ requirements by producing the items as per the specifications or desires of the customers. It seeks to ensure

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delivery of products on time by co-ordinating the production operations with customers’ orders. (vii) Production and Employment Stabilisation: Production planning and control aims at ensuring production and employment levels that are relatively stable and consistent with the quantity of sales. (viii) Evaluation of Performance: The process of production planning and control is expected to keep a constant check on operations by judging the performance of various individuals and workshops and taking suitable corrective measures if there is any deviation between planned and actual operations.

Importance of Production Planning and Control The system of production planning and control serves as the nervous system of a plant. It is a co- ordinating agency which co-ordinate the activities of engineering, purchasing, production, selling and stock control departments. An efficient system of production planning and control helps in providing better and more economic goods to customers at lower investment. It is essential in all plants irrespective of their nature and size. The principal advantages of production planning and control are summarized below: (i) Better Service to Customers: Production planning and control, through proper scheduling and expediting of work, helps in providing better services to customers is terms of better quality of goods at reasonable prices as per promised delivery dates. Delivery in time and proper quality, both help in winning the confidence of customers, improving relations with customers and promoting profitable repeat orders. (ii) Fewer Rush Orders : In an organization, where there is effective system of production planning and control, production, operations move smoothly as per original planning and matching with the promised delivery dates. Consequently, there will be fewer rush orders in the plant and less overtime than, in the same industry, without adequate production planning and control. (iii) Better Control of Inventory : A sound system of production planning and control helps in maintaining inventory at proper levels and, thereby, minimizing investment in inventory. It requires lower inventory of work-in-progress and less finished stock to give efficient service to customers. It also helps in exercising better control over raw-material inventory, which contributes to more effective purchasing. (iv) More Effective Use of Equipment : An efficient system of production planning and control makes for the most effective use of equipment. It provides information to the management on regular basis pertaining to the present position of all orders in process, equipment and personnel requirements for next few weeks. The workers can be communicated well in advance if any retrenchment, lay-offs, transfer, etc. is likely to come about. Also, unnecessary purchases of equipment and materials can be avoided. Thus, it is possible to ensure proper utilization of equipment and other resources. (v) Reduced Idle Time : Production planning and control helps in reducing idle time i.e. loss of time by workers waiting for materials and other facilities; because ensures that materials and

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other facilities are available to the workers in time as per the production schedule. Consequently, less man-hours are lost, which has a positive impact on the cost of production. (vi) Improved Plant Morale : An effective system of production planning and control coordinates the activities of all the departments involved in the production activity. It ensures even flow of work and avoids rush orders. It maintains healthy working conditions in the plant thus ,there is improve plant morale as a by-product. (vii) Good public image: A proper system of production planning and control is helpful in keeping systematized operations in an organization .Such an organization is in a position to meet its orders in time to the satisfaction of its customers. Customers satisfaction leads to increased sales,increased profits ,industrial harmony and, ultimately, good public image of the enterprise . (viii) Lower capital requirements: Under a sound system of production planning and control , everything relating to production is planned well in advance of operations. Where, when and what is required in the form of input is known before the actual production process starts .Inputs are made available as per schedule which ensures even flow of production without any bottlenecks .Facilities are used more effectively and inventory levels are kept as per schedule neither more nor less .Thus ,production planning and control helps, in minimizing capital investment in equipment and inventories.

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Sequencing Or Prioritization After assignment it is also necessary to decide on the sequence in which the jobs are to be processed in a work center. This relative prioritization determines the actual time schedule of the individual jobs. OBJECTIVE OF SEQUENCING- completing by the due date, or with as little delay as possible, as many work orders as possible. (this has three components: one is completing , another is on- time and third is minimum delay which could be expressed as delay or a range of delay. - Utilizing the machinery and such other capital investment to the maximum extent possible - utilizing the manpower capacity to the maximum extent possible. - Minimizing the working capital investment in inventories of semi- processed materials. - Sequencing decides the actual time schedule of each job. - Imagine there are 2 machines and 2 jobsJOB1 JOB2

LATHE 10 HRS 12 HRS

MILLING 15 HRS 14 HRS

We can conclude from above that there will be a queue. In an actual factory, a job involves a no: of operations with use of machines. Therefore the priority rules will have a significant effect on the shop performance. A job shop can be thought of a complex queuing s system with probabilistic times multiple channels, multiple servers, with different set of servers, the priority rule or queue discipline has a very important role to play in a queuing system. VISUAL AIDSOne of the simplest methods /approaches to scheduling is through the use of various visual aids, facilitating the planning of jobs through work centers and depicting the progress of jobs against what is planned. The earliest of these charts was developed by Henry L. Gantt during the early part of the 20 th century. The gnat chart shows how each machine or work center is planned for work on diff job orders- the scheduled start or finish times the extent of actual completion of various jobs every day. Gnat chart is useful for control & corrective actions. Johnsons rule

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S. M Johnson presented a sequencing rule for a situation where there are ‘n’ jobs to be processed through two machines/ work centers. The rule results in min total completion time for there ‘n’ jobs by minimizing the total idle- times of the machine’s’ could be any no: of machines.

UNIT III

Chapter III Production scheduling  Meaning of scheduling  Techniques of scheduling

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Scheduling In this Chapter , we will discuss methods of scheduling tasks or operations on available resources so as to achieve some objectives . An example of a scheduling problem is to determine the order in which jobs in a manufacturing plant will be completed so that the number of on –time deliveries are maximized . other examples of scheduling include the running of programs at a computing center the processing of loan applications by a bank , the landing of procedure aircraft at an airstrips , and performing medical tests on a default , an arbitrary , such as first come first served to a company’s objectives we hope to demonstrate that demonstrate that , by using scientific procedures for scheduling ,a scheduling , a company can achieve significantly better performance on started objectives.

Single Processor Scheduling Consider a hypothetical automated chemical plant that produce several different products, but only one product can be produced at a time . suppose that production manager of the plant has to decide on the scheduling of four products , the production time and due dates for which are shown in table 10-1. the table shows, for example , that product 4 will require 8 days in manufacturing and that it is due to be Delivered in 17 days . The production manager has several alternatives for scheduling the production of these products . For example, he could produce product 1 first and then product 2,followed by product 3, and finally product 4, alternatively , he could produce product 4 product 2 next , then product 1, and finally product 3. In fact , there are 4x 3x 2x1 =24 distinct ways of scheduling the production of these four products . The decision facing the production manager is which one of these possible 24 schedule should be chosen ? This simplified example Illustrates the problem of scheduling on a single processor . single processor or single machine scheduling is of interest for the following reasons . •

There are many situations where an entire plant can be viewed as a single processor , as is the case in chemical manufacturing , paint manufacturing , and the manufacturing of products in automated plants .

.In plants that employ multiple processor , there is often a bottleneck processor that control the output of the plant because of its limited capacity . The analysis of this bottleneck processor may determined the decision for the entire plant .The analysis of a single processor illustrates many important problem

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that arise in more complex scheduling situation , therefore , it serves as a building block for understanding the decision problem in these more complex situations. Product -Prodution time , days Due date , days 1 4 6 2 3 4

7 2 8

9 19 17

Notation &definitions Each job in the single processor-scheduling model is described by two parameters: Pi = processing time for job i di =due date for job i In addition, in some cases, ri, the ready time, release time, or arrival time of job I may be useful. In the models discussed here, all jobs are available for processing at time zero and hence ri = 0 for all jobs. The definition of Pi includes set-up time for job i. If job I is defined as a lot of several identical pieces then Pi will denote the time required to process the complaining considerations. We will consider the due date to be the time by which a job must be completed ;otherwise the job will be deemed late. Several variables determine the solution of a scheduling decision. Some of the more important of these are Wi= waiting time for job i Ci = completion time of job i Fi= flow time of job i Li= lateness of job i Ti = tardiness of job i Ei=earliness of job i Wi is the amount of time job I has to wait before its processing begins. The first job on the schedule will have zero waiting time, and the second job on the schedule will have to wait by the amount of the processing time of first job. Ci is simply the time at which the processing of job I is completed. Fi is the amount of time a job spends in the system; thus Fi = Ci-Ri. Since in our case ri=0, Fi =Ci... Lateness Li, is the amount of time by which the completion time of job I exceeds its due date. Thus Li =Ci-di. Note that Li can be either positive or negative. A positive lateness represents the completion of a job before its due date and is called tardiness, Ti.similarly a nagative lateness represents the completion of a job before due date and is called earliness Ei., Thus, the three measures of schedule, Li,,Ti ,Ei measures the deviation of the completion time from the due date. Since there is often a penalty associated with not meeting due dates, the tardiness measure is usually used. However in some case there may be a penalty for being either or too late (e.g., crop harvesting), so both tardiness &earliness measures may be useful.

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Criteria and objective functions for scheduling Several criteria can be employed to evaluate the performance of a schedule. The scheduling criteria chosen in a given situation depend on the objective function of the manager. For example the underlying objective function or cost function of the company may be such that a penalty is associated with a tardy job ,but once a job is delayed , the amount of tardiness does not influence the cost . In this situation, a scheduling criterion that minimizes the number of tardy jobs will be most appropriate for selecting an optimal schedule. Suppose there are n jobs to be scheduled. Some commonly employed criteria are described in the following material: Mean flow time =F =1/nΣFi This criterion measures the average amount of time that a job spends in the system. Minimization of F is appropriate when rapid turnaround is required &when the objective is to keep a low in process inventory. Rapid turnaround may provide a competitive advantage to the company when customers are sensitive to fast deliveries. Mean tardiness =T =1/nΣTi This criterion is useful when the objective function of the company includes a penalty per unit of time if job completion is delayed beyond a specified due date. For example, a penalty of $x per day may be imposed for each job that is delayed beyond its specified due date. Mean tardiness = T max = max {Ti} To compute maximum tardiness for each job is calculated. The job that has the largest tardiness of all the jobs determines Tmax. For example T1=3,T2= 5,T3=1&T4=4then T5=5 and is determined by job 2. This criterion is useful when the penalty per day for tardiness increases with the amount of tardiness. Number of tardy jobs =nT This criterion simply counts the total number of jobs that are not completed by their due dates. Several other criteria and procedures for selecting a schedule that optimize these criteria have been discussed in Conway, Maxwell and Miller (1967) and baker (1974).

Scheduling Procedures We will now illustrate several scheduling procedures using the example in table 10-1 Shortest Processing Time (SPT) Procedure.. A schedule obtained by sequencing jobs in nondecreasing order of processing times is called a shortest processing time (SPT) schedule. This

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schedule minimizes mean flow time, F. In addition, the SPT rule also minimizes mean lateness and mean waiting time. In the example in Table 10-1, the SPT schedule is This shows that the job 3 is processed first, followed by jobs 1,2, and 4, in that order. In table 10-2, the calculations for obtaining the flow time for each job are shown. Job 3 is first in the sequence; hence, its completion time is 2 days. Job 1 is started after job 3 is finished and takes 4 days. Thus the completion time for job 1 is 6 days. The completion times for the remaining jobs are similarly computed. Since all the jobs are available at time zero, the flow time for each job is identical to its completion time. The mean flow time is computed by simply adding the flow time for each job and dividing by 4. (F1+F2+F3+F4) (6+13+2+21) F= --------------------- = ----------------- = 42/4 =10.5 4 4 It can be checked that no other sequence can produce a better mean flow time than the sequence obtained by the SPT rule. The optimality of the SPT rule can be mathematically proved. By finishing the shorter jobs first, both the turnaround time &the work-in-process inventory are reduced. The SPT procedure is simple to implement and provides good results even in the more complex scheduling situations discussed later. Due date (DD) Procedure. In the due date procedure, jobs are sequenced in the order of nondecreasing due dates. In our example, job 1 will be sequenced in first because it has the earliest due date. The sequence obtained by this rule is : The due date procedure minimizes the maximum tardiness. In the Table 10-3, the computations for individual job tardiness, T, for the due date sequence are shown. The maximum tardiness is 2 days. No other schedule can produce a tardiness of less than 2 days. For comparison, the maximum tardiness for the SPT schedule is 4 days as shown in Table 10-2. COMPUTIONS USING THE SPT PROCEDURE FOR THE DATA IN TABLE 10-1 Job

Processing Time (pi)

Due (di)

1 2 3 4

4 7 2 8

6 9 19 17

date Completion Time For SPT Schedule (Ci) 6 13 2 21

Flow (Fi)

6 13 2 21

time Tardiness (Ti)

0 4 0 4

MOORE PROCEDURE. The number of job tardy for the SPT schedule is 2 & for the DD schedule, it is 3. The Moore procedure minimizes the total number of tardy jobs. This procedures is described in the following steps.

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Step 1. Arrange the jobs in no decreasing order of their due dates (DDSchdule). If this sequence yields one or zero tardy jobs, then the DDSchedule is optimal & procedure stops. In our example, 3 jobs are tardy in the DDSchdule, so we proceed to step 2. Step 2. Identify the first tardy job in the DDSchedule. In our example, the first tardy job in the DDSchdule is job 2, which is marked by an asterisk (*) in the following schedule: DD Schedule Completion time Due date

21 19

Step 3.identify the longest job from among the jobs including & to the left of the job marked with the * in the schedule in step 2. That is, we pick the longest job among the jobs that are completed no later then the completion time of the first tardy job in step 2. In our example, job 1 & 2 are candidates, & since3 job 2 longer processing time of the two, it is identified. COMPUTIONS USING THE DD PROCEDURE FOR THE DATA IN TABLE 10-1 Job

1 2 3 4

date Completion Tardiness Time (Ti) For DD Schedule (Ci) 4 6 4 0 7 9 11 2 2 19 21 2 8 17 19 2 The identified job is removed and the completion times for the remaining jobs are revised.

Completion time Due date

Processing Time (pi)

Due (di)

< 1 4 6

4 12 17

3 > 14 19

We now repeat step 2. In our example, all the jobs now on time, so we terminate the procedure. The Moore schedule is < 1, 4, 3, 2 > which is obtained by simply putting the jobs removed in step 3 at the end of the schedule. Weighted Shortest Processing Time (WSPT) Procedure. If jobs are not of equal importance, then it may be more appropriate to minimize the weighted flow time n

∑

wiFi

I =1

78

Where wi is the weighted associated with the flow of job i. The weights reflect the relative importance of individual job flow time. For example, if w1 = 1 and w2 = 2, it is as desirable to reduce the flow time of job 1 by 2 days as it is to reduce the flow time of job 2 by 1 day. Considerations of the relative costs of each job, the importance of the customer requiring a job, and so forth will influence the determination of wi’s. A simple procedure to minimize the weighted flow time is to compute the weighted processing time, pi/wi, for each job. Now, the job with the smallest pi/wi is scheduled first in the sequence. From the remaining jobs, the job with the lowest pi/wi is selected and is placed in the second position in the schedule. The procedure is repeated until all of the jobs are scheduled. Essentially, the schedule is obtained by arranging the jobs in order of no decreasing pi/wi ratios. Other Procedures. Several other procedures for optimizing a specified criterion are available in the literature. However, even for single processor scheduling, optimization for some criteria is quite difficult. For example, no simple procedure exists for minimizing mean tardiness, T. In such cases, a manager has the choice of using either a simpler procedure that produces good results but cannot guarantee an optimal solution (called a heuristic) or a complex procedure utilizing techniques of combinatorial optimization, which will require the use of a computer and may be expensive to implement but will guarantee optimal results. Several extensions of the basic single processor-scheduling model have been examined in the literature. These include the no simultaneous arrival of jobs, the incorporation of dependence among jobs (e.g., a precedence constraint, such as job i. must be completed before job j), and the allowance for set-up times that depend on the sequence (e.g., the processing of beige paint after black paint may require a higher set-up time than the processing of beige paint after white paint). In addition, Probabilistic situations, where the arrival of jobs is uncertain or jobs have random processing times or due dates, have also been examined.

Flow Shop Scheduling In many situations, there is more than one processor and a job consists of several operations that are to be performed in a specific order. Moving form a single processor job shop to a multiple processor job shop poses a formidable challenge. We first consider a special job shop case in which the flow of work is indirectly A flow shop is a special type of job shop in which machines are numbered 1,2… m and a job may require a maximum of m operations-one operation on each machine. Further, for every job, if operation j precedes operation k, then the machine required for operation j has a lower number than the machine required for operation k. An example of a flow shop is shown in Figure 10-1. In Figure 10-1a, all the jobs require one operation on each processor; such a shop is called a “pure” flow shop. In Figure 10-1b, even though the flow of work is unidirectional, a job may require fewer than m operations and the operations need not be performed on adjacent processors. In Figure 10-1b, job 1 is processed on all three processors, job 2 is processed on processors 2 and 3, and job 3 is processed on processors1 and 3. An example of a flow shop is an assembly line where work progresses form one stage to the next in the same direction. In several manufacturing situations (e.g., the manufacture of printed circuit boards), the same sequence of operations is required for a large number of orders. Further, in any cases, manufacturing can be divided into two stages. One stage is like a flow shop with all jobs having the same sequence, whereas the second stage requires a more complex of operations. One example

79

of such a process is furniture manufacturing where the front end is a flow shop and customization for upholstery, paint , and like accomplished at the back end of the manufacturing process .

Figure 10-1 Schematic of flow shops:(a) pure flow shop;(b) a general Flow shop. ------------------------------------------------------------------------------------------------------------

In Machine 1  Machine 2  Machine 3

In 

Machine 1



 Out

Machine 2



Machine 3

 Out

 Job 1 Job 2 Example of such a process is furniture manufacturing, where the front end is a flow shop and customization for upholstery, paint and the like is accomplished at the back end of the manufacturing process. To demonstrate scheduling procedures for flow shops, consider the example problem in table 10-4.In this example; there are two machines & five jobs. If we schedule the jobs on machine 1&2 in order of the job numbers, we obtain the schedule shown in figure 10-2a .the shaded area show the amount of time during which a machine is idle. The completion time of last job determines the makespan of the schedule, which measures machine utilization. In figure 10-2a, the makespan is 33 units of time. For the special case of a two - machine flow shop, Johnson′s procedure minimizes the makespan. This procedure works as following; Step 1.Determine the minimum processing time on either machine. In our example, it is 2 for job 3 machine1. 80

Step 2a. If the minimum processing time occurs on machine 1,place the associated job in the first available position in the sequence. In our example, job 3 is placed in the first position. Proceed to step 3. Step 2b. The job sequenced by either Step 2a or Step 2b is removed from consideration. The process is repeated, starting with Step 1, until all the jobs are sequenced. Ties can be broken arbitrarily. In our example, once job 3 is removed, the minimum processing time occurs for job 2 on machine 2; hence, by step 2 b, job is placed last in sequence. For remaining machines 1,2&5, the minimum processing time occurs for job 5 on machine 2 ; using stero 2b again , job 5 is placed in the sole available position , the third position the sequence obtained is .As shown in figure 102b, this sequence gives a make span of 30 units. FLOW SHOP SCHEDULING EXAMPLE (ALL JOBS MUST BE PROCESSED FIRST MACHINE 1 AND THEN ON MACHINE 2) Job

Processing time on machine1 Processing time on machine2 1 4 7 2 6 3 3 2 3 4 7 7 5 8 6 SCHEDULE FOR FLOW SHOP EXAMPLE IN TABLE 10-4.(a)SCHEDULE FOR SEQUENCE ON EACH MACHINE. (b) SCHEDULE USING JOHNSON ′ S PROCEDURE.

Time 0 Machine 1

Machine 2

Time 0

2

JO B3

6

13

Time

JOB1

0

JJob1 OB4 JOB 1

Machine1

J Machine2 OB 3Time 5

0

13

21

4

JOB5 Job2 J Job1 OB 4 20

27

10

JOB2 Job3

12

19

Job4

JOB5 Job2 11

27

Job5

JOB2 Job3 Job4 14

17

30

Job5 26

33

Two- machine flow shop, few results are available for other criteria . In fact for scheduling a flow shop with m machines, one has to rely on combinatorial techniques or heuristic procedure. This shows the difficulty in scheduling and the combinatorial nature of problem for even a wellstructured environment like a flow shop.

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General Job Shop Scheduling Our conclusion in the proceeding discussion of flow shops provides a guide for our introduction to general job shops, in which the flow of work may take any pattern. There are no optimal rules or procedures for job shops with more then two machines and two jobs. We will therefore focus on some rules that provide “good” solution most of time. To illustrate the preparation of schedules for schedules for general job shops, we will use the example in Table 10-5.job 3 in this example is due in 12 days, and it must be processed first on machine A for 4 days and finally on machine C for 3 days. As we begin scheduling with machine A, we face the decision of whether job 1 or job2 should be scheduled first. Several simple rules can be employed to resolve the choice of a job from a set of available jobs waiting to be processed on the same machine at a given point in time. Some commonly employed rules are Earliest Due Date First (EDD) Priority is given to the job with the earliest due date.

TABLE 10-5 GENERAL JOB SHOP EXAMPLE Job 1 2 3 4 5 6

Sequence and Processing Times A (3), B(3), C(2) A(5), C(2) B(4), A(4), C(3) B(3), C(5), A(2) C(5), B(4) C(2), A (5), B(5)

Due Date 10 13 12 18 14 15

First In System First Served (FISFS) : Priority is given to the job that arrived in the shop (not on the machine) First.

First Come First Served (FCFS).

: Priority is given to the prcessing of the job that arrived at the machine first.

Least Slack First (LSF): Priority is given to the processing of the job that has least slack. Slack is the difference between the due date and the work remaining on the job. At time zero the slack for job 1 is 10 – (3+3+2) = 2 days in our example. Shortest Processing Time (SPT) : Priority is given to the job with the shortest processing time on the machine under consideration. Least Work Remaining (LWR) : Priority is given to the job with the least amount of total processing remaining to be done.

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Several other rules can be devised to select a job from a set of waiting jobs for scheduling on a machine. The managerial objectives are the simplicity of implementation of a rule as well as the attainment of some desired performance, such as reducing the congestion in the shop, improving machine utilization, and meeting job due dates. Figure 10-3 contains Gantt Charts that show the schedules developed using the aforementioned rules. A Gantt chart is prepared by determining the set of jobs waiting for each machine. If more than one job is waiting for a machine, a rule is used to choose a job to be processed next. When the processing of a job on one machine is completed, that job is added to the waiting list for the machine it needs to be processed by next. The procedure is repeated each day (or unit of time) until all the jobs are scheduled. It is clear from Figure 10-3 that different rules produce different schedules. In Table 10-6, the performance of these rules on the criteria number of jobs tardy total tardiness, mean flow time, and makespan is evaluated. The relative performance of a rule may change if the problem data are modified. In a static situation where all jobs are available simultaneously, it is possible to compare the perform.

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UNIT IV

Chapter I Inventory control  Meaning and objectives of material management  Purpose of inventories  Purchasing process  Vendor development  Economic order quantity  Selective inventory control

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INVENTORY Inventory are those stocks or items which are used to support production (raw materials and workin-process items), supporting activities (maintenance, repair, and operating supplies), and customer service (finished goods and spare parts). The purpose of inventory management is to determine the amount of inventory to keep in stockhow much to order and when to replenish, or order.

Reasons for holding inventory: - Inventory helps us in following areas         

Meeting variations in supplier lead time Getting quantity discounts Facing price changes Meeting scarcities of materials Controlling manufactured parts and goods Cover period between production runs Allow flexibility in production scheduling Cope up variations in product demand (safety stock) Getting economies of scale.

Types of inventories Inventories include Raw materials: purchased items or extracted materials that are converted via the manufacturing process into components and products. Work-in-process: a product or products in various stages of completion throughout the plant. Finished-goods:

Items

ready

for

sale

to

a

customer

MRO: maintenance, repair and operation supplies. Important terms in inventory :Safety stock To avoid customer services problem and the hidden costs of unavailable components, companies hold safety stock.. Safety stock protects against uncertainties in demand, lead time, and supply. Safety stocks are desirable when supplies fail to deliver the desired quantity on the specified date with acceptable quality or when manufactured items have significant amounts of scraps or rework. Safety stock inventory ensures that operations aren’t disrupted when such problems occur, allowing subsequent operations to continue.

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Lead time The lead time is the time between the moment an order is placed and when the merchandise arrives in inventory . Lead times may vary greatly depending on the number of resources required and how congested these resources are currently. If the order is placed to a wholesaler across the street who carries adequate inventory, then few resources are involved and the lead time will be quite short. In such a case, it is convenient to model the lead time as zero. If long transportation times are involved, or if the vendor typically produces after receiving the order, then it may be convenient to model the lead time as a constant. However, if either transportation or the shop floor have variable loads over time, the lead time will vary significantly and may be treated as probabilistic.

Selective Inventory Control ABC Analysis 1.Select a criterion (sales / usage) based on importance 2. Rank the inventory items on criterion 3. Calculate the cumulative sales and/or usage for all items 4. Assign items into A, B, C groups 5. Assign inventory levels and warehouse locations for each item. Based on Pareto’s Law of “Cause and Effect” Means Always Better control Indicates“ Vital few- Trivial many” A- Few items are of key importance and value B&C-Numerous in number, but less significant. A – ITEMS: A items are those items which have a high rate of usage and/or high unit cost and account for 80%of the total value of usage in the inventory .

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High consumption Value Very Strict Control No Safety Stock Frequent Ordering Weekly Control Statement Many Sources of Supply Rigorous Value Analysis Accurate Forecast in Material Planning Minimization of Waste Obsolete and Surplus Maximum Efforts to Reduce Lead Time.

B – ITEMS: B items are those numbers of items which in total account for 15%of the total value of usage. Moderate consumption Value Moderate Control Low Safety Stock Ordering Once in a week Monthly control statement Two or More sources of supply Moderate value Analysis Estimate based on past Quarterly control Moderate efforts C – ITEMS: C are those great many items with low individual usage and or low unit value in total and account for only 5% of the value of usage. Low Consumption Value Low Control High safety stock Bulk ordering once in 6 months Quarterly control statement Only Two source of supply Minimum value Analysis Rough estimate for planning Annual review Minimum clerical efforts

Inventory costs There are three basic costs associated with inventory: Carrying (or Holding), cost Ordering Costs; and Shortage Costs Holding costs: associated with keeping stock over time •

Storage costs

•

Rent/depreciation

•

Labor 87

•

Overheads (e.g. heating, lighting, security)

•

Money tied up (loss of interest, opportunity cost)

•

Obsolescence costs (if left with stock at end of product life)

•

Stock deterioration (lose money if product deteriorates whilst held)

•

Theft/insurance

Ordering costs - associated with ordering and receiving an order •

Clerical/labor costs of processing orders

•

Inspection and return of poor quality products

•

Transport costs

•

Handling costs

Shortage or Stock out Costs: A stock-out occurs when we have insufficient stock to supply customers. Usually stock outs occur in the order lead-time, the time between placing an order and the arrival of that order. Given a stock-out the order may be lost completely or the customer may choose to backorder, i.e. to be prepared to wait until we have sufficient stock to supply their order

UNIT IV

Chapter II Quality assurance  Meaning  Aspects of quality 88

   

Importance of quality How does management decide quality Quality insurance system Quality control through statistical techniques

Quality Assurance What is Quality? 1. Is it customer satisfaction? 2. Is it fitness for use? 3. Is it attributes or properties of the product? 4. Does it mean the lowest price? 5. What is perfect from customers’ point of view? 6. Is honoring the commitment made to the customer? 7. Is it influenced by purchasing power of the customer? 8. Is it excellence in every thing you do? 9. Is it minimization of chances of poor quality or defectives? 10. Does it affect goodwill of the firm? All the above questions reveal the meaning of quality. Quality is fitness for use whether for a product or a service. 89

C. D. Lewis defined quality as “ the degree to which a specific product satisfies a particular class of consumers or consumers in general or the degree to which it confirms to a design specification or the distinguishing feature of a product’s taste, colour, appearance etc”. Product quality has entered the consciousness of the managers with a vengeance. It has become crystal clear that high quality products have a distinct advantage in the marketplace, that market share can be gained or lost over the quality issue. Therefore quality is the competitive priority. The top management sets basic quality standards and goals based on corporate and market inputs, engineering and R&D express these standards in terms of detailed specifications, purchasing and incoming inspections attempt to ensure that meet specifications, the production system must be designed so that it is capable of meeting quality standards and must then produce the requisite quality; inspection and quality controls establish the procedures to ensure that quality is actually produced maintenance keeps equipment capable of producing the requisite quality and so on. The slogan, “Quality is everyone’s job” is really true. In order to produce quality products everyone should be in on the act. Quality assurance is designed to maintain reliability of the entire productive system to do what it was designed to do.

The following are the typical quality measures of the output of the productive systems: TYPE OF SYSTEM Manufacturing Medical service Postal service Banks

MEASURE OF OUTPUT Dimensions, tolerances on dimensions, chemical composition, surface finish, performance tests False positive diagnosis, false negative diagnosis Waiting time at post office, errors in delivery, overall delivery time. Waiting time at windows, clerical errors

Produce what consumer wants Product quality is what is perfect from customers’ point of view. There is no point in making chemically pure salt for the consumer market because the customer will not accept it . The goods must be delivered constantly and as per the specifications required by the customers. Some customers feel that high priced product is of right quality. The idea behind this is that they do not want cheap quality. But they will also not pay too much for their requirements because customer’s purchasing power becomes the upper limit for customer’s willingness to pay. Hence best quality for a customer is best product at the price he can sacrifice.

Aspects of quality

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1. Quality of design 2. Quality of conformance Quality of design refers to properties and characteristics acquired by the product at the design and development stage. These properties depend on the type of material used, safety factors allowed, knowledge and skill of design, personnel employed etc. . Quality of design is the fundamental requisite. Quality of conformance is adherence to the quality of design while the product is being actually produced. Howsoever successful the production is in achieving quality of conformance; it cannot go beyond quality laid down by design. Design itself should consider the type of manpower available and the equipment used. If design is blind to these aspects, the quality of conformance is likely to drop. Quality is a collaborative effort of the designer and the production engineer.

Importance of quality       

Existence of manufacturing organization depends on the quality of the product or services it manufactures or supplies. Employees feel proud to be associated with a producer of quality product and service. Departments and branches in the same organization also feel proud when appreciated for higher quality. Customers also like to buy products of high ranked companies. A producer of high quality products and services earns high profits and goodwill in the long run. Quality is the only tool to compete in today’s world. Quality product manufacturer’s attract highly skilled and professional people.

Cost of poor quality Reduction in sales, thus reduction in profits. Re-establishment of goodwill lost due to poor quality is difficult and time consuming. Cost of rework of the defectives. Need of more rigorous inspection and testing. People in organisation shift responsibility of defectives on others. Indemnity in case of guarantees to customers. Replacement of inferior quality products sold. Sale of sub- standard products at low price. Defective products may cause delays and stoppages in production processes. Supplier may have to incur legal cost to face the suits and claim under consumer protection act.  Forcible withdrawal of substandard product by instruction of the court.  Wrong use of a product may happen because of improper instructions and labels on the product packing. This may lead to enormous problems.          

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Two dimensions of quality-positive and negative Positive costs These costs are attributed to having a spell out optimum quality right from procurement of raw materials to the delivery of the finished product to the final customer. These costs have two aspects, costs for formulation of strategic policies for total quality. There is an attempt to prevent problems, and solve them when they arise. There are training costs to have a quality culture. Another aspect of positive cost is the inspection cost. Both these aspects are investments, which no organisation can avoid. The positive costs should not exceed 6 p.c. Of total turnover, which is a trivial cost to bear considering the benefits, which accrue therefrom. Negative Costs They are three types: 1) Costs attribute defects creeping in the manufacturing process. 2) Costs due to rectification of defects like after –sales service costs. 3) Costs on account of rejection of a consignment by a customer for sub-standard quality goods, especially by an importer. Many a time, non- production departments contribute a great deal to the negative costs e.g. purchase department, maintenance department, design and engineering department.

How does the manufacturer decide quality ? The marketing department in terms of quality, quantity and price makes the assessment or study of customer needs. This information is passed on to the design-engineering department. Then a detailed specification is prepared by the design engineer with the help of heads of all departments. The cost of production and ability to produce are also considered while developing the detailed specifications. Thus one can say that specifications are the detailed description of product’s design in quantitative terms. Generally three types of specifications are used: -

1) Technical specifications- physical and chemical properties desired in the product. When the desired properties are in the measurable form, they are termed as

2) Performance specifications - describe, the performance or use of the products products or the services that a product will give. conformed by using the product.

3)

of the The conformance to the quality can be

Brand Name - Performance specification s are extensively used in purchasing highly technical military and space products and also complicated machines and machine tools with sophisticated technology. When it becomes very costly to develop performance or technical specifications or such a practice does prove satisfactory, purchases are made on the basis of brand names.

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It should be noted that on the basis of strict specifications, materials parts, and tools etc. may not be available continuously. In such circumstances, if a slight difference in specifications does not affect the quality of the final product or the performance of the product ‘ materials or parts or tools should not be rejected. Considerable judgement should be applied while taking decision of acceptance or otherwise.

Control loops for maintaining system reliability by monitoring quality and quantity of output Figure 1

The quality assurance system Inputs

Outputs

Processes

Breakdowns Monitor quality and quantity of output

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Readjust processes to conform to standards

Interpret results

Maintain equipment through repair and preventive programs

Figure 1 suggests the nature of control loops for quality and maintenance control However it is local in nature and great deal unsaid We must ask where did the standards come from? What is the nature of productive system, and is it appropriate for the quality tasks?

Establishment of policies regarding quality desired in relation to markets, investments requirements, return on investment, potential competition, etc.

Quality and the design of products and services in relation to productive system

Design of productive system to be compatible with quality, cost, and capacity requirements

Quality standards for materials processes performance of: services products

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Inspection and control of incoming materials

Information for revision of nature of services offered and product designs

Information for revision of quality standards

Production of goods and services

Inspection and control of processes and performance of products and/or services

Maintenance and preventive maintenance systems

Schematic representation of the relationships among policies, design of products and services, design of the productive system, and the maintenance of system reliability for qualities and quantities. Fig 2 places the reliability system in context. The organisation must set policies regarding the desired quality in relation to markets and needs, investment requirements, return on investment potential competition, and so forth. For profit making organisations, this involves the judgement of where in the market the organisation has a relative advantage. Thus one can say that the production system must be designed so that it is capable of meeting quality standards and must then produce the requisite quality; inspection and quality control establish procedures to ensure that the quality is actually produced; maintenance keeps equipment capable of producing the requisite quality; and so on. The slogan “quality is every one’s job” is really true. In order to produce quality products, every one must be on the act. Quality assurance is designed to maintain the reliability of the entire productive system to do what it was designed to do.

Statistical Quality Control Historical perspective Quality Control has been with us for a long time. It is safe to say that when manufacturing began and competition accompanied manufacturing, consumers would compare and choose the most

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attractive product (barring a monopoly of course). If manufacturer A discovered that manufacturer B's profits soared, the former tried to improve his/her offerings, probably by improving the quality of the output, and/or lowering the price. Improvement of quality did not necessarily stop with the product - but also included the process used for making the product. The process was held in high esteem, as manifested by the medieval guilds of the Middle Ages. These guilds mandated long periods of training for apprentices, and those who were aiming to become master craftsmen had to demonstrate evidence of their ability. Such procedures were, in general, aimed at the maintenance and improvement of the quality of the process. In modern times we have professional societies, governmental regulatory bodies such as the Food and Drug Administration, factory inspection, etc., aimed at assuring the quality of products sold to consumers. Quality Control Science of statistics is fairly recent. On the other hand, statistical quality control is comparatively new. The science of statistics itself goes back only two to three centuries. And its greatest developments have taken place during the 20th century. The earlier applications were made in astronomy and physics and in the biological and social sciences. It was not until the 1920s that statistical theory began to be applied effectively to quality control as a result of the development of sampling theory. Walter Shewhart first advanced the concept of quality control in manufacturing The first to apply the newly discovered statistical methods to the problem of quality control was Walter A. Shewhart of the Bell Telephone Laboratories. He issued a memorandum on May 16, 1924 that featured a sketch of a modern control chart. Shewhart kept improving and working on this scheme, and in 1931 he published a book on statistical quality control, "Economic Control of Quality of Manufactured Product", published by Van Nostrand in New York. This book set the tone for subsequent applications of statistical methods to process control. Two other Bell Labs statisticians, H.F. Dodge and H.G. Romig spearheaded efforts in applying statistical theory to sampling inspection. The work of these three pioneers constitutes much of what nowadays comprises the theory of statistical quality and control. There is much more to say about the history of statistical quality control

Control Charts Control charts are used to routinely monitor quality. Depending on the number of process characteristics to be monitored, there are two basic types of control charts. The first, referred to as a univariate control chart, is a graphical display (chart) of one quality characteristic. The second, referred to as a multivariate control chart, is a graphical display of a statistic that summarizes or represents more than one quality characteristic. Characteristics of control charts If a single quality characteristic has been measured or computed from a sample, the control chart shows the value of the quality characteristic versus the sample number or versus time. In general, the chart contains a center line that represents the mean value for the in-control process. Two other horizontal lines, called the upper control limit (UCL) and the lower control limit (LCL), are also shown on the chart. These control limits are chosen so that almost all of the data points will fall within these limits as long as the process remains in-control. The figure below illustrates this. 96

Chart demonstrating basis of control chart

The control limits as pictured in the graph might be .001 probability limits. If so, and if chance causes alone were present, the probability of a point falling above the upper limit would be one out of a thousand, and similarly, a point falling below the lower limit would be one out of a thousand. We would be searching for an assignable cause if a point would fall outside these limits. Where we put these limits will determine the risk of undertaking such a search when in reality there is no assignable cause for variation.

Variables Control Charts During the 1920's, Dr. Walter A. Shewhart proposed a general model for control charts as follows: Shewhart Control Charts for variables Let w be a sample statistic that measures some continuously varying quality characteristic of interest (e.g., thickness), and suppose that the mean of w is w, with a standard deviation of w. Then the center line, the UCL and the LCL are UCL = w + k w Center Line = w LCL = w - k w where k is the distance of the control limits from the center line, expressed in terms of standard deviation units. When k is set to 3, we speak of 3-sigma control charts. Historically, k = 3 has become an accepted standard in industry.

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The centerline is the process mean, which in general is unknown. We replace it with a target or the average of all the data. The quantity that we plot is the sample average, . The chart is called the chart. We also have to deal with the fact that is, in general, unknown. Here we replace w with a given standard value, or we estimate it by a function of the average standard deviation. This is obtained by averaging the individual standard deviations that we calculated from each of m preliminary (or present) samples, each of size n. This function will be discussed shortly. It is equally important to examine the standard deviations in ascertaining whether the process is in control. There is, unfortunately, a slight problem involved when we work with the usual estimator of . The following discussion will illustrate this. Sample Variance If 2 is the unknown variance of a probability distribution, then an unbiased estimator of 2 is the sample variance

However, the sample standard deviation is not an unbiased estimator of . If the underlying distribution is normal, then s actually estimates c4 , where c4 is a constant that depends on the sample size n. This constant is tabulated in most text books on statistical quality control and may be calculated using C4 factor

To compute this we need a non-integer factorial, which is defined for n/2 as follows: Fractional Factorials

With this definition the reader should have no problem verifying that the c4 factor for n = 10 is .9727. Mean and standard deviation of the estimators So the mean or expected value of the sample standard deviation is c4 .

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The standard deviation of the sample standard deviation is

What are the differences between control limits and specification limits ? Control limits vs. specifications Control Limits are used to determine if the process is in a state of statistical control (i.e., is producing consistent output). Specification Limits are used to determine if the product will function in the intended fashion. How many data points are needed to set up a control chart? How many samples are needed? Shewhart gave the following rule of thumb: "It has also been observed that a person would seldom if ever be justified in concluding that a state of statistical control of a given repetitive operation or production process has been reached until he had obtained, under presumably the same essential conditions, a sequence of not less than twenty five samples of size four that are in control." It is important to note that control chart properties, such as false alarm probabilities, are generally given under the assumption that the parameters, such as and , are known. When the control limits are not computed from a large amount of data, the actual General rules for detecting out of control or non-random situations WECO stands for Western Electric Company Rules Any Point Above +3 Sigma --------------------------------------------- +3 LIMIT 2 Out of the Last 3 Points Above +2 Sigma --------------------------------------------- +2 LIMIT 4 Out of the Last 5 Points Above +1 Sigma --------------------------------------------- +1 LIMIT 8 Consecutive Points on This Side of Control Line =================================== CENTER LINE 8 Consecutive Points on This Side of Control Line --------------------------------------------- -1 LIMIT 4 Out of the Last 5 Points Below - 1 Sigma ---------------------------------------------- -2 LIMIT 2 Out of the Last 3 Points Below -2 Sigma --------------------------------------------- -3 LIMIT Any Point Below -3 Sigma Trend Rules: 6 in a row trending up or down. 14 in a row alternating up and down

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Attributes Control Charts Attributes data arise when classifying or counting observations The Shewhart control chart plots quality characteristics that can be measured and expressed numerically. We measure weight, height, position, thickness, etc. If we cannot represent a particular quality characteristic numerically, or if it is impractical to do so, we then often resort to using a quality characteristic to sort or classify an item that is inspected into one of two "buckets". An example of a common quality characteristic classification would be designating units as "conforming units" or "nonconforming units". Another quality characteristic criteria would be sorting units into "non defective" and "defective" categories. Quality characteristics of that type are called attributes. Note that there is a difference between "nonconforming to an engineering specification" and "defective" -- a nonconforming unit may function just fine and be, in fact, not defective at all, while a part can be "in spec" and not functions as desired (i.e., be defective). Examples of quality characteristics that are attributes are the number of failures in a production run, the proportion of malfunctioning wafers in a lot, the number of people eating in the cafeteria on a given day, etc. Types of attribute control charts Control charts dealing with the number of defects or nonconformities are called charts (for count). Control charts dealing with the proportion or fraction of defective product are called p charts (for proportion). There is another chart which handles defects per unit, called the u chart (for unit). This applies when we wish to work with the average number of nonconformities per unit of product. Counts Control Charts Defective items vs. individual defects The literature differentiates between defect and defective, which is the same as differentiating between nonconformity and nonconforming units. This may sound like splitting hairs, but in the interest of clarity let's try to unravel this man-made mystery. Consider a wafer with a number of chips on it. The wafer is referred to as an "item of a product". The chip may be referred to as "a specific point". There exist certain specifications for the wafers. When a particular wafer (e.g., the item of the product) does not meet at least one of the specifications, it is classified as a nonconforming item. Furthermore, each chip, (e.g., the specific point) at which a specification is not met becomes a defect or nonconformity. So, a nonconforming or defective item contains at least one defect or nonconformity. It should be pointed out that a wafer can contain several defects but still be classified as conforming. For example, the defects may be located at no critical positions on the wafer. If, on the other hand, the number of the so-called "unimportant" defects becomes alarmingly large, an investigation of the production of these wafers is warranted. Control charts involving counts can be either for the total number of nonconformities (defects) for the sample of inspected units, or for the average number of defects

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Acceptance Sampling A lot acceptance-sampling plan (LASP) is a sampling scheme and a set of rules for making decisions. The decision, based on counting the number of defectives in a sample, can be to accept the lot, reject the lot, or even, for multiple or sequential sampling schemes, to take another sample and then repeat the decision process. Types of acceptance plans to choose from LASPs fall into the following categories: •

Single sampling plans:. One sample of items is selected at random from a lot and the disposition of the lot is determined from the resulting information. These plans are usually denoted as (n,c) plans for a sample size n, where the lot is rejected if there are more than c defectives. These are the most common (and easiest) plans to use although not the most efficient in terms of average number of samples needed.

•

Double sampling plans: After the first sample is tested, there are three possibilities: 1. Accept the lot 2. Reject the lot 3. No decision If the outcome is (3), and a second sample is taken, the procedure is to combine the results of both samples and make a final decision based on that information.

•

Multiple sampling plans: This is an extension of the double sampling plans where more than two samples are needed to reach a conclusion. The advantage of multiple sampling is smaller sample sizes.

•

Sequential sampling plans: . This is the ultimate extension of multiple sampling where items are selected from a lot one at a time and after inspection of each item a decision is made to accept or reject the lot or select another unit.

•

Skip lot sampling plans:. Skip lot sampling means that only a fraction of the submitted lots are inspected.

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EXERCISE 1 Fill up the blanks in the following statements with appropriate words, phrases or short sentences: 1. In selective inventory management one of the methodology used is known as VED analysis. VED stands for……… 2. ABC Analysis is selection control of times based on………. 3. FSN stands for……….. 4. ABC stands for……….. 5. MRP stands for………. 6. Aggregate planning is planning for……term and is not for………….planning 7. SQC stands for……… 8. SPC stands for…….and does control of process through……..charts. 9. Various types of control charts used are…….and……charts,……..charts, and……….charts

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10.The SQC technique used for incoming inspection of material is called……… …plans. 11.JIT concept in quality means……….. 12.QC stands for………and QA stands for…….. 13.ISO 9001,ISO 9002 and ISO 9003 are the three modules which are for certification. ISO 9001 involves…….. ,…………..,……….. and……… ISO 9002 involves……...,…………..and…………. ISO 9003 involves…………..and ………..only. Where ISO…….and ISO……….are only guidelines for Quality Assurance for selection of……..and………elements respectively. 14.Ordering cost and inventory carrying costs are………..in nature and hence they give rise to a point of intersection at which Total Inventory Carrying cost is……… 15.A quality circle is a small……….of employee in companies who discuss and try to improve the quality of the output and other work related matters. 16. The ‘p’ chart is used for………type of data and ‘c’ type of chart is used for… …….type of data. 17.Quality costs can be mainly divided into 3 costs………costs,………….. cost and………cost. 18.TQM stands for………..

EXERCISE 2 State whether the following statements are True (T) or False (F) 1. A forklift can be used for horizontal as well as vertical movements 2. Mobile cranes cannot move from one place to another. 3. Selection of material handling equipment depends upon the nature of the commodity to be handled. 4. Line layouts generally involve low investments by way of equipment and machinery. 5. Plant layout and material handling are closely interred related. 6. A stock item is a part of inventory. 7. EOQ strikes a balance between inventory carrying cost and ordering costs. 8. Decrease of death rate due to advancement in medical sources is associated into trend analysis of Time Series. 9. Increase sale of cloth and garments during the months of Oct. and Nov. is associated with Trend analysis of Time Series. 103

10.Decline of ice-cream sales during winter season is associated with seasonal analysis of Time Series 11.Senior executive spend more time on ‘A’ items than on ‘B’ or ‘c’ items.

CASE I PART EMPORIUM It’s June 6, Sue McCaskey’s first day in the newly created position of materials manager for parts Emporium. A recent graduate of a prominent business school, McCaskey is eagerly awaiting her first real-world problem. At approximately 8:30.It arrives in the form of status reports on inventory and orders shipped. At the top of an extensive computer printout is a handwritten note from Joe Donnell, the purchasing manager: “Attached you will find the inventory and customer services performance data. Rest assured that the individual inventory levels are accurate because we took a complete physical inventory count at the end of last week. Unfortunately, we don’t keep compiled records in some of the areas as you requested. However, you’re welcome to do so yourself. Welcome aboard!” A little upset that aggregate information isn’t available, McCaskey decide to randomly select a small sample of approximately 100 items and compile inventory and customer service characteristics to get a feel for the “total picture.” The results of this experiment reveal to her why Parts Emporium decided to create the position she now fills. It seems that the inventory is in all the wrong places. Although there is an average of approximately 60 days of inventory, a customer

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service is inadequate. Parts Emporium series to backorder the customer orders not immediately filled from stock, but some 10 percent of demand is being lost to competing distributorships. Because stockouts are costly relative to inventory holding costs, McCaskey believes that a cycleservices level of at least 95 percent should be achieved. Parts Emporium, Inc., was formed in 1967 as a wholesale distributor of automobile parts by two disenchanted auto mechanics, Dan Block and ED sprigs. Originally located in Block’s garage, the firm showed slow but steady growth until 1970, when it relocated to an old, abandoned meatpacking warehouse on Chicago’s South Side. With increased selection, combined with the trend toward longer car ownership, led to an explosive growth of the business in the mid to late 1970s. By 1991, Parts Emporium was the largest independent distributor of auto parts in the North central region. In 1993, Part Emporium relocated in a sparkling new office and warehouse complex off interstate 55 in suburban Chicago. The warehouses space alone occupied more than 100,000 square feet. Although only a handful of new products have been added since the warehouse was constructed, its utilization has increased from 65 percent to more than 90 percent of capacity. During this same period, however, sales growth has stagnated. These conditions motivated Block and sprigs to hire the first manager from outside the company in the firm’s history. Sue McCaskey knows that although her influence to initiate changes will be limited, she must produce positive results immediately. Thus she decides to concentrate on two products from the extensive product line: the EG151 exhaust gasket and the DB032 drive belt. If she can demonstrate significant gains from proper inventory management for just two products, perhaps Block and sprigs will give her the backing needed to change the total inventory management system.

The EG151 exhaust gasket is purchased from an over seas supplier, Haipei, Inc. actual demand for the first 21 weeks of 1994 is shown in the following table Week 1 2 3 4 5 6 7 8 9 10 11

Actual Demand 104 103 107 105 102 102 101 104 100 100 103

Week 12 13 14 15 16 17 18 19 20 21

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Actual Demand 97 99 102 99 103 101 101 104 108 97

A quick review of past orders, shown in another document, indicates that a lot size of 150 units is being used and that the lead-time from Haipei is fairly constant at two weeks. Currently, the end of week 21, no inventory is on hand; 11 units are backordered, and there is a scheduled receipt of 150 units. The DB032 drive belt is purchased from the Bendox Corporation of Grand Rapids, Michigan. Actual demand so far in 1994 is shown in the following table. Week 11 12 13 14 15 16

Actual Demand 18 33 53 54 51 53

Week 17 18 19 20 21

Actual Demand 50 53 54 49 52

Because this product is new, data are available only since its introduction in week 11. Currently, 324 units are on hand; there are no backorder and no schedule receipts a lot size of 1000 units is being used, with the lead-time fairly constant at three weeks. The wholesale price that part Emporium charges their customers are $ 12.99 for the EG151 exhaust gasket and $8.89 for the DB032 drive belt. Because no quantity discount are offered on these two highly profitable items, gross margins based on current purchasing practices are 32 percent of wholesale price for the exhaust gasket and 48 percent of the wholesales price for drive belt. Parts Emporium estimates its cost to hold inventory at 21 percent of its inventory investment. This percentage recognizes the opportunity costs of tying money up in inventory and the variable costs of taxes, insurance, and shrinkage. The annual report notes other warehousing expenditures for utilities and maintenance and debt services on the 100,000- square-foot warehouse, which was built for $1.5 million. However, McCaskey reasons that these warehousing costs can be ignored because they won’t change for the range of inventory policies that she is considering. Out-of-pocket costs for Part Emporium to place an order with suppliers are estimated to be $20 per order for exhausts gaskets and $ 10 per order for drives belts. On the outbound side, there can be delivery charges. Although most customers pick up their parts at parts Emporium, some orders are delivered to customers. To provide this services, Parts Emporium contracts with a local company for a flat fee of $21.40 per order, which is added to the customer’s bill. McCaskey is unsure whether to increase the ordering costs for parts Emporium to include delivery charges. Questions 1. Put yourself in sue McCaskey’s position and prepare a detailed report to Dan Block and Ed Spriggs on managing the inventory of the EG151 exhaust gasket and the DB032 drive belt. Be sure to present a proper inventory system and recognize all relevant costs. 2. By how much do your recommendations for these two items reduce annual cycle inventory, stockout, and order ering costs? Source: Professor Robert Bregman, university of Houston, provided this case.

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CASE II Fitness Plus, Part A Fitness Plus, Part B, explores alternatives to expanding a new downtown facility and is include in the Instructor’s Manual. If you’re interested in this topic, ask your instructor for a preview. Fitness Plus is a full-service health and sports club in greenboro, North Carolina. The club provides a range of facilities and services to support three primary activities: fitness, recreation, and relaxation. Fitness activities generally take place in four areas of the club: the aerobics room equipped with free weights; a workout room with 24 pieces of Nautilus equipment; and a large cardiovascular workout room containing 29 pieces of cardiovascular equipment. This equipment includes nine stairsteppers, six treadmills, six life-cycle bikes, three airdyne bikes, two crossaerobics machines, two rowing machines, and one climber. Recreational facilities comprise eight recquetball courts six tennis courts, and a large outdoor pool. Fitness Plus also sponsors softball, vollyball, and swim teams in city recreation leagues. Relaxation is accomplished through yoga

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classes held twice a week in the aerobics room, whirlpool tubs located in each locker room. And a trained message therapist. Situated in a large suburban office park, fitness Plus opened its doors in 1988. during the first two years, membership was small and use of the facilities was light. By 1992, membership had grown as fitness began to play a large role in more people’s lives. Along with this growth came increased use of club facilities. Record indicates that, in 1992, an average of 15 members per hour checked into the club during a typical day. Of course, the actual number of member per hour varied by both day and time. On some days during a slow period, only 6 to 8 members would check in per hour. At a peak time, such as Mondays from 4 :00 P.M to 7:00 P.M, the number would be as high as 40per hour. The club was open from 6:30 A.M. to 11:30 P.M. Monday through Thursday. On Friday and Saturday the club closed at 8:00 P.M., and on Sunday the hours were 12:00 noon to 8:00 P.M. As the popularity of health and fitness continued to grow, so did fitness Plus. By may 1997, the average number of members arriving per hour during a typical day had increased to 25. The lowest period had a rate of 10 members per hour; during peak periods 80 members per hour check in to use the facilities. This growth brought complaints from members about overcrowding and unavailability of equipment. Most of these complaints centered on the Nautilus, cardiovascular, and aerobics fitness areas. The owners begin to wonder whether the club was indeed too small for its membership. Past research has indicated that individuals work out an average of 60 minutes per visit.Data collected from member survey showed the following facilities usage pattern: 30 percent of the members do aerobics, 40 percent use the cardiovascular equipment, 25 percent use the Nautilus machines, 20 percent use the free weights 15 percent use the racquetball courts and 10 percent use the tennis courts. The owners wondered whether they could use this information to estimate how well existing capacity was being utilized. If capacity levels were being stretched, now was the time deciding what to do. It was already May, and any expansion of the existing facility would take at least four months. The owners knew that January was always a peak membership enrollment month and that any new capacity needed to be ready by them. However, other factors had just received a major facelift, and many new offices and business were moving back to it, causing resurgence in activity. With this growth came increased competition. A new YMCA was offering a full range of services at a low cost. Two new health and fitness facilities had opened within the past year in locations 10 to 15 minutes from fitness Plus. The first, called the Oasis, catered to the young adult crowd and restricted the access of children under 16 years old. The other facility. Gold’s Gym provided excellent weight and cardiovascular training only. As the owners thought about the situation, they had many question: were the capacities of the existing facilities constrained, and if so, where? If capacity expansion was necessary, should the existing facility be expanded? Because of the limited amount of land at the present site, expansion of some services might require reducing the capacity of others. Finally, owing to increased competition and growth downtown, was now facility would take six months to renovate, and the financial resources were not available to do both. Questions 1. What method would you use to measure the capacity of fitness Plus? Has fitness plus reached its capacity? 2. Which capacity strategy would be appropriate for fitness Plus? Justify your answer.

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3. How would you link the capacity decision being made by fitness plus to other types of operating decision?

ASSIGNMENTS Guidelines for attempting the assignments  Only left margin of reasonable size should be made.  Diagram(s)/figure(s) should be given in each answer .  Each answer should have the layout in this manner . 1)introduction . 2)subject matter (body). 3)conclusion (summary )of the answer.  Attempt should be neat and clean as far as possible handwriting. .

Unit 1 109

and in a good

Chapter1 Nature and scope of Production Management 1.Define production. Give a brief history of the development of production management . 2. Define production management and discuss its scope . 3.“ Production management deals with decision making related to production processes so that the resulting goods or services are produced according to the specifications , in the amounts and by the schedules demanded and at a minimum cost”. Discuss.

Chapter II Demand Forecasting 1.What do you mean by demand forecasting ? Explain various techniques of demand forecasting.

Unit 2 Chapter I Facilities location 1.What factors affect the choice of a suitable place for location of a plant ? 2.Discuss the importance of facilities location decision in operations planning . 3.Why are some industries located near the source of raw materials, whereas some industries are located near the markets for their finished goods ?

other

Chapter II Capacity planning 1.What do you mean by capacity ? State various ways of defining capacity . 2. How do you do capacity planning in following situations : a) New projects . b) Existing projects requiring expansion.

Chapter III Plant layout 1. What is plant layout ? What are the objectives which management desires to attain through the efficient plant layout ? 2. What are the different types of layout ? What are the advantages and disadvantages of each type of layout ? 3. What are the factors to be borne in mind while deciding upon plant layout ? 4. Write short notes on the following : (a) Techniques of plant layout . (b) Factors affecting construction of plant building. (c) Line balancing .

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Production system 1.What are the important types of production systems ? Explain 2.Make a comparative study of different types of production systems .

Chapter V Material handling system 1.What is material handing ?Explain its importance . 2.How does plant layout affect material handling ?Explain 3. Explain the principles of material handling . 4. Explain various types of material handling equipment ?

UNIT 3 Chapter I Aggregate planning 1.What is aggregate planning ? Explain various models of aggregate planning 2.What are the objects and advantages of aggregate planning ?

Chapter II Production planning and control 1.What do you understand by production planning and control ? What is its need and importance to a manufacturing organisation? 2.What does PPC aim for ? Discuss the steps involved in the same . 3.State the requirements of an effective system of PPC. 4.Discuss the production planning and control under different production systems .

Chapter III Production scheduling 1. What is scheduling ?Why is it necessary ? 2. Explain the fundamentals of scheduling with reference to various production systems .

UNIT 4 Chapter I Inventory control 1.What is inventory .Why is it called a necessary evil for an organisation? 2.What do you favour --inventory depletion or inventory accumulation ? Explain. 3.Explain various methods of inventory control with a special stress on ABC analysis . 4. Explain selective inventory control and its techniques ?

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Quality assurance 1.Explain the meaning of quality ? How does a manufacturer determine it. 2. Define quality control and tell how does it differ from inspection ? 3.In quality control what is meant by a process being in control?

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