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Producation and operation Mgt............

Producation and operation Mgt............

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Production and Operations Management

Module 1: Introduction to Production and Operations Management
Products – Television, Soap, Car , Garments Services – Medical treatment, consultancy, Education, Transport • • Products are manufactured Services are provided

Some of the characteristic differences between product and Service (there are exceptions!) Product 1. Customer is not associated during production 2. Is tangible 3. Can be made in anticipation and stocked 4. Requirements can be stated in clear terms 5. Meeting requirements can be easily checked 6. Input material content is relatively high 7. Transformation process normally done by machines or low cost human resource 8. Products have life cycle till discarded ( use, Maintenance, servicing, obsolescence) 9. Products may have residual value 10. Products are pushed to market and selected by customer based on requirements / life style Service 1. Customer associated during service 2. Is intangible 3. Cannot be stocked: can be provided on demand. 4. Requirements cannot be stated in clear terms 5. Satisfaction can be felt after service is delivered 6. Input material content is relatively low 7. Transformation process is normally done by skilled human resource 8. Life cycle concept do not exist 9. Services do not have any 10. Services are normally need driven and pulled by customer


• • •

Organizations can be manufacturing or Service organizations No organisation is pure product oriented or pure service oriented (Car manufacturers have components like servicing, handling warranty complaints. Hospitals have components like drugs, diagnosis reports etc) Classification is based on whether product orientation is dominant or service


Typical Transformation activities for products • Purchasing of Raw materials and Storage • Production ( conversion )- Cutting, Machining, Fabrication, painting, packing • Inspection and testing • Ware housing and delivery Transformation activities for Services vary greatly depending on type of service. For Hospital, these activities are • Out patient services • In-patient services (eg. ward, ICU, OT) • Diagnostic service ( eg. X-ray, laboratory, scans) • Purchase of medicines and Dispensing • Blood bank activities


Transfo process

Definition of Production and Operations Management Production and operation management is defined as the design, operation and improvement of the transformation process which converts the various inputs into the desired outputs of products and services The term “operations management” is widely used now which includes manufacturing and service organizations. Critical system elements of production Management • Product , process and service design • Facility, capacity, location and layout • Capacity management • Materials management • Production scheduling • Quality management • Technology management Responsibilities of Production manager 1. Planning of geographical location of factory 2. Purchasing production equipment 3. Layout of equipment 4. Process Design 5. Establishment of work standards 6. Capacity planning 7. Production planning and scheduling 8. Production control 9. Inventory management 10. Supply chain management 11. Quality control 12. Industrial relations 13. Equipment Maintenance 14. Health and safety 15. Staff selection and training 16. Budgeting and capital planning Some factors affecting Production management 1. 2. 3. 4. 5. 6. High Quality level demands by customer ( PPM, 6 sigma) Low lead time for manufacture Large verities Low Batch Quantities Global Competition Pressure on operating cost reduction ( raising input costs with product prices declining)


Good production management can offer competitive advantage to a firm by: 1. 2. 3. 4. 5. 6. 7. Sorter new-product lead time More inventory terns Sorter manufacturing lead time Higher quality Greater flexibility Better customer service Reduced wastage

Types of production • Continuous production – very few verities – very long production runs – Eg. Cement , Steel, Plastic • Semi-continuous production – Few varieties – Long production runs – High volume of output – Repetitive in nature – Eg. Automobiles, electronic items, Soaps, White goods • Intermittent production – Batch production • Many verities • Short production runs • low volume of output • Repetitive in nature • Eg. Standard tools, products to customer specifications, earth moving machinery – Job shop • Few numbers • Specials • Not repetitive • Eg. Specials Tools, custom built cars,

Competitiveness means : 1. Existing demand for products 2. Value for money 3. No threat from competitors 4. No threat of obsolescence 5. Continuous additions to product features insuring future acceptance and demand 6. Quality, pricing meets customer expectations and competitors at a distance 7. High customer satisfaction


Productivity Productivity ensures competitive edge 1. Labour productivity 2. Inventory Turn over 3. Return on Investment (ROI) 4. Quick product Design & development 5. Less time to Market 6. Marketing efficiency 7. Supplier rationalization 8. Total Productive Maintenance (TPM) Strategic management means formulations of long term goals and actions plans to accomplish those goals. It consists of the following broad steps: 1. Analysis of opportunities and constraints in the market place 2. Formulation of strategies 3. Implementation of the strategies 4. Evaluate and control till objectives are reached Typical; corporate strategies • Horizontal integration • Vertical integration • Mergers • Alliances • Disinvestment Typical unit level strategies: • Increase market share by 4% • Launch 10 new products in next 3 years • Increase exports by 100% • Reduce cost by 15% Some strategy factors: • Make –buy decisions • Automation • Computerization • Supplier development • Waste elimination • Value addition • Cost reduction • New product introduction and timing • Value engineering • Business process re-engineering


Production and Operations Management
Module 2: Product, Process and Service design
Product Design • Products are designed to P r o du ctio n meet customer and O pe ration s requirements , needs and expectations • Examples: Car, TV, Soap, Garments, perfumes, Apartments • Examples: Bank loans, course curriculum, postal services,

M a r k eting C usto me r

Produ ct D e sign a n d D e velo p m e nt

2. 3. 4. 5.

Product design and Development stages 1. Design and development Inputs( eg. Features, safety, customer needs and expectations, Regulations) Design and Development Outputs ( eg Specifications, Drawings ) Design and development review ( with production, maintenance, QA for manufacturability and serviceability) Design Verification ( eg. calculations, prototype and testing) Design and development validation ( eg. Performance testing , field trials)

Product design concepts 1. Research and development • Using state of knowledge on the subject for commercial applications ( Applied research) 2. Reverse Engineering • Dismantling and studying competitors products. Reduces development time. Provides opportunity to improve on the competitor’s product 3. Manufacturability • To ensure ease of manufacture and assembly. Using existing manufacturing capabilities such as machines, equipment, Skills of workers . 4. Standardization • Refers to use of less variety of parts to build a products. • Modular design refers to standardization of modules or sub-assembly of parts. • Reduced cost. Faster time to market, Ease of maintenance and servicing. • Example: use of indicator lamps, meters for various models of Motorcycles


5. Robust design • Designing a product that is operational in varying environmental and other conditions of usage (eg. dust, vibration, temperature , humidity, over load ) 6. Concurrent Engineering • Involvement of other functional areas during early stages of design • Functions like Marketing, production, purchase, Tool design, servicing are involved for review and incorporation of any changes required. • Faster time to market. No holdups during production. 7. Computer-aided design • Use of computer soft ware for design • Three dimensional visualizations possible. • Faster, accurate, cost effective, easy to change, easy to transmit, easy to collaborate, • Links to computer aided manufacturing possible

P r o d uc t d esi g n c o nc e pts
• L ife C yc le o f pr o d uct

Dem and

M a t u ri t y D e cl i n e g ro wt h

Incubati on

Ti me

Manufacturing processes ( Production processes)
Broad classification: 1. Forming processes • Change shape of work piece without adding or removing material 2. Machining processes • Change shape of work piece by removal of material in the form of chips or particles 3. Assembly processes • Joining or fastening of parts/ components 4. Heat treatment


Heating , soaking and cooling of parts in furnace at determined levels to obtain desired mechanical properties 5. Finishing processes • Change the surface properties of parts. For protective and decorative purposes. Eg corrosion resistance, coloring, aesthetics Forming processes Casting- pouring or forcing molten material into moulds of desired cavity. Eg. Gravity casting, injection moulding, pressure die- casting • Forging-Formed during plastic state by impact or force. Eg. Die forging, upset forging, roll forging • Extrusion- forcing the metal through to obtain desired cross section • Drawing -Pulling material through dies of desired cross section. Eg. Wire drawing • Stamping- normally for thin sheets. Impacting in a press to obtain desired size and shape. • Embossing or coining- Stretching of metal in a closed die. Eg. Making of currency coins. Medals Machining processes • Turning- material is removed by a cutting tool in contact with rotating work piece. • Drilling and boring- making of holes using drill bit. Making of large circular cavities using boring tools • Milling- making of flat surfaces on work piece using a milling cutter • Grinding- Finishing of circular parts or flat parts using a rotating grinding wheel. Normally for hardened parts. • Shaping and planning- material is removed by linear motion of a cutting tool on work piece. • Electro –discharge machining( EDM)- Erosion of material by sparking between electrode and work piece. For very hard materials , intricately shaped parts, tooling Assembly processes • Welding-joining of work pieces by fusion due to heat. eg. Gas welding, arc welding, spot welding, seam welding, laser welding • Brazing- joining of metals using brazing alloys. Strength of joint less than welding • Soldering- joining of metals using soldering alloys. Eg. Making of PCBs. Soldering of wires. Normally for electrical connections • Riveting- joining of overlapped plates by upsetting rivets in holes . Eg. Boiler • Fastening-joining using screws, nut and bolts • Assembly using adhesives- used for metals, wood, plastics, rubber. Eg furniture, shoes, toys Heat treatment processes • Annealing- softening to improve machinablity • Normalizing-to improve grain structure and relive internal stresses • Hardening- to increase hardness which improves wear properties. • Tempering- normally follows hardening. To decrease brittleness • Case hardening- to increase hardness in surface only leaving the core tough. 8 •

Cyaniding-immersion of steel in molten bath of carburizing salt followed by quenching. Distortion is less. Finishing processes cleaning is done to remove dirt, oil, scale, rust before and after finishing operations • Metallic coatings- Electroplating, Hot dipping, Galvanizing ( zinc coating), Tin coating, Phosphating, anodizing ( for aluminum) • Plastic coating- PVC, Nylon, Polythene etc to prevent rusting for tanks, pipelines etc • Organic finishes- Paints, varnishes, enamels • Inorganic finishes- ceramic coatings, porcelain enamels. Highly wear resistant

Process planning
• • Process planning deals with methods of converting Input materials into finished products. A Production process is a series of manufacturing operations performed at work stations to achieve the design specifications at planned output. Types of processes – Continuous process – Semi-continuous – Batch process – Job shop – Project

Starting point for process design is the outputs from product design. These may be product specification, Drawing, Technical specifications , Product standards etc. Output Quantity requirements greatly influences the process planning and design Process planning consists of two areas: • Process design • Operations design Process design covers the overall conversion/ transformation process 1. Input materials required 2. Sequence of operations 3. Existing Infrastructure 1. Machine and equipments 2. Facilities ( handling, storage) 3. Layout of plant 4. Tooling ( devices required to produce a particular product- commercial tools, special tools) 6. Inspection and testing stages and methods 7. Quantities to be produced


Operation design: Covers how individual operation are to be. 1. Design of individual operations in a process 2. Man-machine relation ship 3. Economics 4. Work standards The Basic objective of Process planning and design is to: • Produce products that consistently meet design specifications • Produce products at the lowest cost • Produce products with proven production technology System approach to process planning and design Input Process Output

Inputs • • • • Process • • • • • • Out puts • • • • • • Product information Resources ( machines, equipment, facilities) Output requirements Manpower availability Selection of type of processes ( forming, machining etc) Make or buy decisions Equipment studies Production sequence Tooling studies Inspection and testing studies

Production sequence and equipments Raw material specifications Layout of machines Tooling requirements Inspection stages and equipments

Process planning aids: Assembly charts- gives pictorially step by step assembly sequence and what items to be assembled till finished product is produced


Process charts: Operation process chart- gives the sequence of operations, machine to be used, tooling needed, inspection stages. These are also called “ROUTING SHEETS” Flow process charts-gives graphically, with symbols, manufacturing operations, inspection stages, Transport operations, Delays, storage requirements. Man-machine chart- gives a graphical representation of what worker will be doing and machine will be doing over time. This is to effectively use workers time when machine is operating unattended. This is to increase productivity. Types of process designs • Product focused production system o All production processes or organized an a continuous flow. Required machines are lined up to make the product • Process focused production system o Machines/ equipments are grouped according to process ( machining, forming etc). products flow from one location to another depending on the process. Travel distances are more. Products are stored without processing for want of machine. • Group Technology ( Cellular manufacturing) o Products are grouped into families based on processing requirements . o Machines re lined up to process each family . this gives the advantage of product focused system to batch production. Economic analysis • Process which gives lowest cost per unit is the best • Processes to have the same capability. Otherwise we may have to take cost of rejections into calculations. Increase production by rejection percentage and add raw material cost to your calculation • Take into consideration the total number of products to be made , if there are any limitations • Manufacturing cost per unit may include • Setup cost • Tooling cost • Fixture cost • Operating cost ( labour, power etc) Production costs • Fixed costs (Depreciation, Insurance, administration etc) • Variable costs ( material, consumables, power , Direct labour costs etc) Break even analysis is done to determine quantity to be produced to cover the production cost. Producing less than break even quantity results in loss to the company. Example


Fixed cost is Rs 50 000 per year, Material cost is Rs. 50/ pc, other variable cost is Rs 30/ pc . the selling price is Rs 100 / pc . What is the break even point? Let X be the break even Quantity. Then 50, 000 + 50 X + 30 X = 100 X X = 50000 / 20 =2500. Comparing processes to determine which is the best.

Process A Components / setup Setup cost Production rate / hr Operating cost /`hr Operating hrs /setup Operating cost Total mfg. cost Cost/piece 4000 Rs 300 10 20 4000/10=400 400 X 20=8000 300+8000=8300 8300/4000=2.057

Process B 3000 Rs 1500 15 20 3000/15=200 200 X 20=4000 1500+4000=5500 5500/3000=1.833

Production Technology
Mechanisation- deals with replacement of hard manual muscle power by using devices like power lifts, conveyors , hydraulic and pneumatic devices etc. Automation- deals with all activities in production operations and service operations to make them faster, accurate, with minimum human intervention and cheaper at high production volumes Production technology deals with automation all aspects of manufacturing, which includes: o Production activities o Planning and procurement activities o Inspection activities o Integration of design with production ( CAD/CAM) o handling, storage , transport Automation levels/`areas • Automated machines – Machines with pallet changers, Tool magazine , Automatic tool changers, strip feeders, tool wear detection and correction, in- built inspection system • Machine attachments


• •

• • • • •

Attachments to make the machine more versatile. Grinding attachments on lathe, power operated holding devices, Quick change tooling, copying attachments , digital readouts, strip feeders Numerically controlled machines – Machine movements controlled by servo motors , stepper motors (closed loop or open loop), multi-axis controls, eg. Lathes, milling machines Robots – Programmable devices . Can pick and place, weld, paint . Load and unload components with in its reach. Can work in hazardous areas. Can tend many machines. Automated inspection devices – Vision systems, on –line inspection devices, Computerized measuring machines Automated Identification systems – Automatic acquisition of information, eg bar code systems, smart cards, RFID, biometrics Automated process controls – Continuous checking of performance and automatic correction/ adjustment of process parameters. Eg. Power stations, oil refineries, chemical plants Automated storage and retrieval systems (ASRS) – Taking orders , collecting materials from locations in ware house and delivery to dispatch section or to production areas. Eg. Garments, tools, hardware Automated lines – Machines linked together by automatic raw material feeders, transport equipments. Hard automation. Good for single part produced in very large quantities Flexible manufacturing systems – CNC Machines linked together by AGVs( automatic guided vehicles). Highly programmable and hence flexible. Normally used for a family of similar components. Set up times are less and hence can handle very small batch quantities economically.

Advantages of automation 1. Enhanced productivity 2. Improved and uniform Quality 3. Reduced total cost per unit 4. Better production control 5. Dangerous and unpleasant tasks can be easily handled 6. Fewer accidents

Disadvantages of automation ( constraints) 1. Heavy capital investment 2. Displacement of Labour


3. Tighter input material specification may be needed. 4. Cost of material shortages/ breakdowns are high 5. Reduced demand is disastrous. Problem An automotive component manufacturer wants to improve competitiveness. Cost of 3 manufacturing methods are as below: 1. On the basis of economic analysis , rate the three alternatives. 2. If 1,50,00 units are to be produced in a year, what would be the most desirable and least desirable alternative? CM Annual production( units) 1,00,000 Annual fixed costs Variable cost per unit Rs 90,000 Rs 29.40 CNC 1,00,000 1, 90.000 Rs 28.50 FMS 1,00,000 3, 20, 000 Rs 27.30


Production and Operations Management
Module 3: Facility, capacity, location and layout
Forecasting • Estimating future demand for products and service Need for forecasting – New facility planning – Production planning – Work force scheduling – Material planning – Financial planning Types of Forecasts • Long range ( years) – Factory capacity, new product development, • Intermediate range ( months) – Purchasing, inventory management • Short range( weeks) – Cash out flow, production planning, labour planning Forecasting methods • Quantities methods – Based on previous data – Appropriate for shot period • Qualitative methods – Based on judgment of experts – Long periods in future • Demand patterns – Constant – Linear – Seasonal Models for forecasting: • Simple moving average ( SMS) • Weighted moving average( WMA) • Exponential smoothening model ( ESM) • Regression analysis (identifying the variables and developing a model for forecasting) • Delphi Method ( taking views of experts from inside and outside the organisation) • Field expectation method • Customer expectation method SMS example : If the demand for a product was 100, 120, 120 for the months of Jan, Feb. and March, fore cast for April would be ( 100+120+120)/ 3 = 113.33 rounded off to 114. WMA example : demand forecast for above example with weightage of 4, 2, 1 for previous months would be ( 100 x 1 + 120 x 2 + 120 X 4 ) / 7 = 117.44 rounded off to 118 15

ESM example Formula: smoothened forecast = forecast + smoothening factor ( Actual demand last periodforecasted demand for last period) Example : a company fore casts a demand of 400 units every month but would like to smoothen forecast based on previous month actual demand by factor 0.25. if the demand for April was 375 what is the forecast for May? Forecasted demand = 400 + 0.25 X ( 375-400) = 400- 6.25 =393.75 rounded off to 394

Plant Location ( Facility Location)
Consists of identifying location: 1. Within the country or outside a. Political stability b. Exchange rates c. Closeness to consumption d. Human resources and skills 2. Selection of the region a. Availability of Raw materials b. Nearness to market c. Availability of power d. Transport facilities e. Climate f. Governmental policy g. Competition between regions 3. Selection of locality a. Availability of labour b. Amenities for workers c. Existence of competitors d. Finance facilities e. Local taxes 4. Selection of the exact site. a. Topography, size b. Disposal of wastes c. Land cost Location Models 1. Factor Rating method 2. Point rating method 3. Break even analysis 4. Quantitative factor analysis


Factor rating method

Point rating method Factor Availability of Fuel Water supply Topography Factor Other factors Total Tax advantage Closeness to Customer Closeness to suppliers Factor 4 Factor n 4 3 5 Max. points 300 200 200 Factor rating Location A 200 200 150 Location rating Location X A 8 2 8 Location B 6 3 10 Location B 150 200 175 Location rating X Factor rating Location A Location B Y 32 6 40 24 9 50




Break even analysis 1. Determine all relevant costs 2. Categorize as fixed cost and variable cost 3. Total cost=fixed cost + variable cost X quantity produced 4. Compare total cost for all locations and determine the most suitable location A graph can also be drawn which helps analysis over different production outputs


A Total cost B C


Problem :A firm is considering 4 alternate locations for a new plant annual interest on capital is 10%. Determine the best location for an output of 1, 20, 000 units Data Rs A B C D Labour cost/unit 0.75 1.10 0.80 0.90 Plant construction cost 46 lakhs 39 lakhs 40 lakhs 48 lakhs Material and 0.43 0.60 0.40 0.55 equipment cost per unit Electricity charges per 30, 000 26, 000 30,000 28,000 year Water charges per year 7,000 6,000 7,000 7,000 Transportation cost per 0.02 0.10 0.10 0.05 unit Taxes per year 33,000 28,000 63,000 35,000


Qualitative Factor analysis method Factors Production cost Raw material supply Labour Availability Cost of living Environment Markets Total Assigned Weight 0.35 0.25 0.20 0.05 0.05 0.10 1.00 Score for locations A B 50 40 70 60 80 50 70 80 70 70 60 90 C 60 80 60 40 70 80 Weighted scores A B 17.5 14.0 17.5 12.0 4.0 2.5 7.0 60.5 20.0 14.0 3.5 3.0 9.0 63.5 C 21.0 20.0 12.0 2.0 3.5 8.0 66.5

Manufacturing Facility planning
Basic input for manufacturing capacity planning is the long range forecast for demand for products and services Deals with: 1. Identification of production and operating equipments 2. Space and building requirements 3. Raw material requirements and Sources 4. Storage quantities and facilities 5. Inspection facilities 6. Maintenance facilities 7. Material handling equipments ( eg. conveyors, cranes) 8. Administrative areas ( eg. purchase, personnel) 9. Canteen, conveniences 10. Other requirements of the plant based on product produced, environmental requirements, power requirements, storage of hazardous materials


Manufacturing planning may be : • • • Long range planning is normally for 3 to 10 years Medium range planning normally for 1 to 3 years Short range planning is normally for 3 months to 1 year

Plant Layout (Facility Layout)
Plant layout deals with locations for: 1. Production machinery 2. Location of stores ( Raw materials, WIP, Finished goods) 3. Inspection facilities ( Receiving, In- process and Final inspection) 4. Tool rooms 5. Maintenance requirements 6. Material handling equipments ( eg. conveyors, cranes) 7. Administrative areas ( eg. purchase, personnel) 8. Canteen, conveniences 9. Other requirements of the plant based on product produced, environmental requirements, power requirements, storage of hazardous materials. Since the plant layout is not frequently changed because of economic reasons and long production stoppages, utmost attention has to be paid for layout design. However layout may be changed based on changes in product design; change in production methods or towards expansion. Some of the objectives of a good layout: 1. Provide required production capacity 2. Reduce material handling costs 3. Provides for free movement of materials and people 4. Reduce hazards and hence safety and health of personnel 5. Utilization of available space efficiently and effectively 6. Enhancement of employee morale 7. Flexible to handle variations in volume and product variations 8. Supervision to be easy 9. Easy maintenance on equipments 10. High utilization of equipment 11. Enhanced productivity Major factors influencing the layout are: 1. Materials- solid or liquid, light or heavy 2. Product- normally product moves from work station to work station. When product is very large, machinery and men are moved to product 3. Worker-whether stationery or moving. On conveyor belt operations worker is stationery and belt stops for prearranged time at every work station 4. Machinery- depends on the type of manufacturing operations, size of product, volume of product. Manual, semi automatic, automatic 20

Principles of layout (Importance of Layout) 1. Minimum travel-Materials and men should travel the shortest distance. Heavier materials are to travel the least. Typically 30% of the production cost is because of material handling 2. Minimum production delays: materials should spend minimum time as possible in the facility. Operations to flow in a sequential order. Back tracking for operations on the same machine to be eliminated. bottle necks to be avoided 3. Usage of space- every meter of space to be effectively utilized. Land costs are high. Maintenance costs are also high. 4. Early detection of Quality problems: Continuous flow, Inspection points 5. Better production control. Less chasing work. Visual control. Few control points. 6. Improved utilization of labour: workers time to be used effectively. 7. Compactness- all functional areas are fully integrated and act as a well knit facility 8. Safety- hazards to be as less as possible. Work place to be economic for productivity 9. Flexibility- slight variations in volume or change in product features should not affect the productivity of the layout 10. Maximum return Investment- fixed capital cost to be as low as possible and Investments to be fully utilized Some types of Layout 1. Process layout ( job shop layout, functional layout) 2. Product layout ( flow line layout, line processing layout) 3. Cellular manufacturing ( CM) or Group Technology layout 4. Combined layout 1.Process layout Turning machines Milling machines



Drilling machines


Features 1. 2. 3. 4. Different sizes of machines are grouped Distance between grouped machines are made as short as possible Groups are arranged such that there is no back tracking Convenient Inspection


5. 6. 7. 8.

Convenience of supervision Many types of products can be manufactured Low volume of production Many inspection points are required

Advantages 1. Machines are general purpose and hence reduced investment 2. Flexibility in production 3. Better supervision 4. Capacity expansion is easy 5. Better utilization of men and machines 6. Break downs can be easily handled Disadvantages 1. Movement of material is difficult. Mechanization not easily possible. 2. Requires more floor space 3. Production control is difficult 4. Distance traveled is more 5. Accumulation of WIP ( work- in -progress) 2. Product Layout Features 1. Individual machines are arranged as per sequence of operations 2. No back track at all. Flow is continuous. 3. All operations eg production, inspection, assembly is include in a line 4. One or two standard products can be produced 5. Large volume of production 6. Minimum inspection required


Individual machines

Assembly line



Advantages 1. Mechanization is possible thus reducing martial handling costs 2. Production bottle necks are avoided 3. Better production control 4. Less floor space required for production 5. WIP is very minimum 6. Early detection of mistakes 7. Very high Through put time Disadvantages 1. Inflexible 2. Layout is expensive 3. Expansion is difficult 4. Breakdown or rejections in a line or machine stops the entire production Comparison of product and process layout # 1 2 3 4 5 6 7 Characteristics Mechanization of material handling Reduced bottle necks Minimum Manufacturing time ( trough put time) Minimum work in progress Better production control Early detection of bad workmanship Better performance measurement of workers Product layout • • • • • • • Process layout


8 9 10 11 12 13

Reduced investment in machines Flexibility in production Scope for expansion Easier handling of breakdowns Better utilization of workers and equipment Specialisation in supervision

• • • • • •

3. Cellular manufacturing


Features This brings the advantages of product layout to identified products in a process layout facility. Some Machines are grouped into cells to manufacture a group of products with similar characteristics and process flow (family of products). Cells could exist in a manufacturing facility along with process layout for other products Machines can be laid out in ‘U’,’L’ and Straight line to suit the material flow and overall layout of the facility

Advantages 1. Lower WIP 2. Reduced material handling 3. Shorter throughput times 4. Simplified production planning 5. Improved visual control 6. Less time for setup because of few tool changes 7. Lower cost of production 8. Sorter delivery 9. Improved Quality due to early detection of problems


Disadvantages Reduced flexibility Less machine utilization Additional machines may be required to create cells In a cellular manufacturing setup advantages heavily overweigh the disadvantages

4. Combined layout

Forging presses

Gear cutting mcs

Heat treatment Furnaces

Gear Grinding mcs


Features o Machines are grouped as process layout. o Products are processed on identified machines to maintain flow. o Used when batch processing like heat treatment is necessary. o Used when costly machines are involved and duplication for pure product layout is not economical.

Apart from location of production machines, a layout has to integrate the following facilities: • • • Receiving and dispatch areas- space, material handling equipments, Storage areas- space , Safety, Material handling equipments Maintenance areas- storage of spares, area for repairs 25

• • •

Inspection areas- inspection equipments, Space Employee facilities- Quarters, , rest rooms, change rooms Others – diesel generating sets, treatment plants, Laboratories, tool rooms

Design and Selection of layout depends on: Material handling cost- using material handling equipments, keeping the distances shorter, keeping sequential processing activities in adjacent areas Worker effectiveness- good communication, well placed supporting areas, ergonomics Methods for Selection of layout Travel Chart method The solution may be trial and error. Principle is most active departments should be close together or adjacent. Problem A manufacturing concern has 4 departments and number of moves between departments is as follows. From To A B C D A 2 2 B 2 4 C 3 1 D 2 1 Step1 ; locate most active departments ( compute no. of links) Department A B C No. of links 4 4 4 Step2: try to locate the most active departments at the centre All are important here.

D 4

2 A 2 D 1 2 2 1 C 4 3 B


Step3 : ensure there are no non adjacent movements. Enter no. of moves in the chart Load –Distance analysis Problem : A company wants to add a new wing to its manufacturing shop which layout is better. Lay out A 1 2 3 4 5 6 7

2 Layout B 3 1 Distances are as below; Between Departments 1-2 1-3 1-4 2-3 2-4 3-4 4-5 5-6 5-7 6-7





Distances between departments Layout A Layout B 24 50 24 30 38 48 44 20 30 72 44 52 50 40 50 44 50 60 40 40

Products produced , Batches produced per year and sequence of processing; Products P1 P2 P3 P4 P5 Processing sequence 1-2-3-4-5-6-7 1-2-4-5-6-7 1-3-4-5-6-7 1-3-4-5-7 1-4-5-6-7 Batches of products produced per year 1400 200 1200 300 200


Solution; Step 1: calculate distance traveled for each batch of products for each layout Product P1 P2 P3 P4 P5 Sequence 1-2-3-4-5-6-7 1-2-4-5-6-7 1-3-4-5-6-7 1-3-4-5-7 1-4-5-6-7 Distance moved Layout A 24 + 44 + 44 + 50 + 50 + 40 =252 24 + 30 + 50 + 50 + 40 =194 24 + 44 + 50 + 50 + 40 =208 24 + 44 + 50 + 50 =168 38+ 50 + 50 + 40 =178 Layout B 50 + 20+ 52+ 40+ 44+ 40 =246 50 + 72+ 40 + 44 + 40 =246 30+52 +40 + 44 + 40 =206 30 + 52 + 40 + 60 =182 48 + 40+ 44+ 40 =172

Step 2 : compute total distance moved per year Product Batches per year 1400 200 1200 300 200 Distance per batch Layout A 252 194 208 168 178 Product Layout B 246 246 206 182 172 Total Layout A is better. The material movement is lower. Total distance =Batches per year x Distance per batch Layout A Layout B 3, 52, 500 3, 44, 400 38, 800 49, 200 2, 49, 600 2, 47, 200 50, 400 54, 600 35, 600 34, 400 7, 26, 900 7, 29, 800

P1 P2 P3 P4 P5


Production and Operations Management
Module 4: Capacity Management

Method study

Job design

Job enlargement Job rotation Job enrichment Principles of motion economy

Work design

Stop watch Time study Work measurement Work Sampling

Work Design is the over all term used for Job design and Work measurement. Job design aims to organize tasks, duties and responsibilities into a unit of work . The objective may be: • to increase Productivity • To reduce costs. • job satisfaction • motivation Poor job design may lead to • Lower productivity • High attrition rate • Absenteeism • Complaints • Sabotage


Objectives of Job design Technical feasibility – Jobs ( set of tasks) should be able to be performed by the person (s) with y the equipments and systems available. Economic feasibility – cost of performing the job should \be as low as possible Behavioral feasibility- motivation and mental simulation are considered. Techniques of Job design Work simplification- Big job is broken down into small parts and assigned to one employee. Less trained or less skilled persons can do the job. This may also result in highly repetitive jobs and less job satisfaction. Job rotation Job enlargement Job enrichment - Persons are assigned different jobs at different times . reduces boredom , monotony and exposes employees to different aspects of the process. Adding similar tasks to a job. to add variety and autonomy . to make work more meaningful. - tasks of planning, organizing and controlling are assigned along with routine tasks. Objective is more involvement, motivation and satisfaction. -

Ergonomics Ergonomics is concerned with designing of work situations with human characteristics in mind. 1. Human and machine interfaces- some considerations are : location on tools , switches, parts for assembly , controls, levers, push buttons, Working height, sitting height, left hand and right hand operations, heights at which readings are taken, weights lifted, forces applied , direction of force . 2. Environmental factors – which affect morale, productivity, quality and long term heath problems. Ambient temperature ( 26-38 C) , Noise ( < 90 dB), Lighting( 100 ft-candles Machines), vibrations, air circulation, comfortable furniture.

Work Study
Work study is concerned with the analysis of work methods and the equipment used in performing the job, the design of optimum work method and the standardization of proposed work methods. Work study covers: • Method study • Work Measurement


Objective of work study: Analysis of present method and to develop a new and better method • To measure work content by measuring time and to establish standard time. • To increase the productivity by ensuring best possible man- machine interface • To reduce cost of production / increase efficiency Benefits of work study 1. Increased productivity 2. Reduced production costs 3. Better layout 4. Better manpower planning 5. Reduced handling costs 6. Better Morale and satisfaction of employees 7. Standard performance measurement and basis for incentive schemes

Methods study
Method is a technique of observing, recording and examining the present method of performing the work with a view to develop a cheaper and productive method. It covers work processes, working conditions, equipments and tools used to carry out the job. When method study is conducted: 1. High operating cost 2. Heavy rejections 3. Excessive movement of materials and men 4. Production bottle necks 5. Quality problems 6. Poor working conditions 7. Excessive overtime 8. Poor delivery performance Objectives of Method study: 1. To study present method and propose new and improved method 2. Improvement in productivity and cost 3. Reduce material handling and operator fatigue 4. Elimination of wasteful motions 5. To standardize work methods Advantages of Method study: 1. Work simplification 2. Improved method( cheaper and productive0 3. Better quality product 4. Improved layout 5. Better material handling


6. 7. 8. 9.

Better work flow Less fatigue to operator Shorter production time Job satisfaction

Method study procedure 1. Selection of work based on present problems and scope for improvement 2. Record relevant facts and information on existing method , use appropriate charts and diagrams 3. Examining recorded facts ( use what, when , how, who, where, why type of questioning on collected facts) 4. Developing improved method by a. Eliminating wasteful tasks b. Simplifying tasks c. Combining tasks d. Evaluating alternatives with respect to cost, savings, feasibility , reaction of employees, short term and long term implications etc. 5. Installing improved method ( plan, schedule, coordinate, involve all concerned) 6. Maintaining the new method ( feed back on performance towards objectives) Symbols used in process charts: Operation ( conversion) Inspection Storage Recording Charts and diagrams used in method study: # 1 2 3 Chart type Outline process chart Operations process chart Flow process charts Usage Covers only main operations and Inspections Includes operations, inspections and material inputs Includes sequence of operations, transportation, inspections, delays and storages. • For Material or product • For Man • For Machine Depicts the activities of both hands or limbs Movement /‘ Transportation Delay / waiting Combined activity


Two handed process charts


5 6

Multiple activity chart Man- machine chart

For more than one worker/ machine or equipment • • Worker and machine on common time scale Worker and two machines on common time scale

7 8 9

Flow diagram String diagram SIMO chart

Actual paths followed by materials. Diagram drawn to scale Sting used to trace the path of materials or workmen in a scale plan or a Model. To measure distances traveled. Simultaneous motion cycle chart . used for cery small cycle time operations .

Micro motion study is useful for analysis of very small cycle operations, rapid movements and high production rates. E.g. Sewing, assembly of small parts. Video pictures are taking and analyzed to understand the minute tasks and to eliminate unnecessary movements. Therbligs which indicate basic body motions of worker is used to analyse the activities. Some therbligs are: Search , Select, Grasp ,Transport empty, Transport loaded, Hold, Release load, Position, Inspect, Assemble, Disassemble Principle of motion economy Aims at minimizing the fatigue of workers due to repetitive motions of various parts of body such as hands, feet, eyes etc. Some principles: • Two hands should begin and complete their motions at the same time • Two hands should not be idle at the same time except during rest • Curved motions are preferred to straight line motions • Fixed place for tools and materials • Materials to be fed to point of use by feeders • Materials and tools to be located for best sequence of motions • Height to be such that alternate suiting and standing is easily possible • Materials to be prepositions • Operations to be combined • Levers, clamps to have greatest mechanical advantage


Work Measurement
Work measurement is concerned with techniques to establish work content of specified task by measuring the time required to carry out the job at defined standard of performance by a qualified worker. Qualified worker ( ILO Definition): A qualified worker is one who has the necessary physical attributes, intelligence, education and skills and knowledge to carry out the work to satisfactory standards of safety, quality and quantity Objectives of Work Measurement • Improved planning and control • Basis for sound incentive schemes • Better utilization of manpower • Better labour productivity • Better labour cost control Work measurement procedure: ( arriving at standard time for the job) 1. Divide the job into elements 2. Record observed time for each element by • Time study • Synthesis • Analytical estimation • Predetermined motion time system ( PMTS) ( for basic body movements) 3. Establish elemental value by normalizing observed values 4. Add relaxation allowances ( personal, fatigue) 5. Add contingency allowances ( for non-repetitive elements) 6. Process allowance ( for forced idleness , wating for operation to complete) Time study Determination of the amount of time required to perform a unit of work at defined level of performance. Objective of Time study 1. To set standards of performance 2. To determine labour costs 3. To balance the work of operators 4. To establish a incentive scheme Conducting time study 1. Select job 2. Select worker to be studied 3. Plan and stopwatch study a. divide into elements. Elements may be repetitive, occasional, manual , machine foreign etc b. Measure time with stop watch 34

c. Note rating factor ( normal pace of work is equivalent of walking 4 kmph ) 4. Determine normal time for each element by: Normal time = observed time x rating factor Synthesis method Synthesis method takes values of normal time for reach element from the data base developed and available . data base has elemental times for all similar job elements eg.` loading, unloading, clamping, checking etc. Advantages: less time to establish, reliable , good for estimation for new jobs Analytical estimation Takes data from elemental time data base as far as possible. Estimation of time is made for remaining elements based on experience Advantages : good for non-repetitive jobs and for estimation for new jobs Predetermined motion time systems Times for basic motions ( Therbligs ) are established in TMUs ( time measurement units) . 1 TMU =0.036 sec. Times for reach, move , grasp etc are available in TMUs.

Problem1: Calculate standard production per shift of 8 hours with following data. Observed time per unit= 5 mins Rating factor =120% Total allowance =33 1/3 % of Normal time Ans: observed time X observed rating = Normal time x normal rating 5 x 120 =Normal time X 100 : normal tine = 5 x 120 / 100 = 6 min. allowance = 33 1/3 percent = 1/3 of normal time = 6/3 =2 min. Standard time =normal time + allowance = 6 +2 =8 min Standard production / shift = time available / standard time per piece = (8 x 60)/ 8 =60 pcs. Problem 2; Time for making 4 pieces of an item with elements a, b, c, d is as follows .. Fatigue allowance is 25% of normal time. find the standard time per piece Element a b c d Cycle 1 ( min) 1.2 0.7 1.4 0.5 Cycle 2 ( min) 1.3 0.6 1.3 0.5 Cycle 3 ( min) 1.3 0.65 1.3 0.6 Cycle 4 ( min) 1.4 0.75 1.2 0.4 Rating 85 120 90 70


Ans # a b c d

average observed time 1.3 0.675 1.3 0.5

Normal time 1.105 0.81 1.17 0.35

Total Normal time = 3.435 Allowance = 25/100X 3.435 = 0.858 : Standard time = 3.435 + 0.858 =4.29 min. Standard time per pc = 4.29 / 4 =1.073 min per pc

Work sampling
Work sampling is based statistical theory of random sampling and probability of Normal distribution. Normally used for determining fraction of time the machines are idle or the operators are idle. More the number of samples taken, less is the error. No. of observations n= pqz2 / a2

p= percentage of observations where machine was idle q= 100-p( percentage machine not idle) z= desired confidence level ( z=1 for 68.3%, 2 for 95.4%, 3 for 99%) a= desired accuracy or error ( in percentage) Advantages • Economical • Not necessary to use trained work study experts • No stop watch measurements Limitations • Little value to improve the operations • If random sampling is not done results will be erroneous Problem Nine observations were made for machine busy or idle. If an accuracy of +- 15% is required at a confidence level of 95.4%, determine the sample size necessary. No. 1 2 3 4 Working yes yes yes no 36

5 6 7 8 9

yes no no yes yes ; q =66.67% ; z=2 ; a= 15%:
= 39.50 = 40 observations

Ans p= 3/9 X 100 = 33.33%
n= pqz2 / a2 :

n= 33.33 x 66.67 x (2 x 2) / 15 x 15

Production – refers to total out put : 1000 pcs per month ; 100 tons of castings per month Productivity = Out put / input = Quantity of goods and services / Amount of resources used Productivity can be improved by: • Increase production with same amount of resources • Decrease resources while keeping the production same • Add few resources and get higher production • Allow slight production decrease while utilizing significantly less resources Productivity can be applied to labour, space, money, materials energy used . Ways of measuring labour productivity; • Output per man –hour = Output / man hours used ( 50 pcs per man-hr) • Labour hour per unit of out put = man-hours/ output ( 100man-hrs per part) • Added value per unit of labour cost = added value for the product/ total wages ( eg. 8, 10 ) Some ways to increase productivity: 1. Reducing rejections and rework 2. Reducing cycle time 3. Reducing setup time 4. Reducing wasted time by method study 5. Good training 6. Automation

Learning curve
Workers take more time in the beginning when the task or product is new. As they gain experience the performance improves. The reduction in time taken is drastic in the beginning , tapers off and finally the time taken is constant .


There are mathematical models to estimate the time taken such as : • Arithmetic analysis • Logarithmic analysis Typical learning curve is as below

Time taken

No. of components

Aggregate planning
Aggregate planning involves best quantities to be produced during the time period ( normally 6months to 18 months) at the lowest cost. It involves: • Planning work force size • Production rate • Inventory levels Aggregate production planning involves determining the output levels of product groups for the planning period. Aggregate planning or aggregate capacity planning consists of devising a plan to support the production required. Why aggregate planning is required? 1. It facilitates loading of facilities fully. Minimizes over loading and under loading 2. Provision of production capacity to meet aggregate demand 3. Helps in Systematic production in spite of peaks and valleys in customer demand. 4. Utilization of resources is enhanced Steps in Aggregate capacity planning 38

1. 2. 3. 4.

Prepare sales forecast for each product over the planning period (normally 6-18 months) Indicating quantities for weeks/ months . Sum up individual product requirements into one arrogate demand for the factory. Convert aggregate demand into labour, materials, machines and other elements of production capacity 5. Identify alternate resources for supplying necessary production capacity , if required. 6. Develop alternatives and select one which meets the objectives of the organization. Production capacity may have to be computed with respect to: 1. Size of work force 2. Use of over time or idle time 3. Inventories or back orders 4. Use of subcontractors Costs associated with aggregate planning are: Pay roll costs Cost of overtime Second shift/ third shift operation Cost of hiring or laying off workers Cost of inventories Cost of backlogs ( liquidity damages – reduced price in case of delays as a part of contract) Approaches to Aggregate planning Topdown approach – consideration is given to product families , products and quantities. Does not consider small capacity differences that may exist among specific products Bottomup approach- each product with details at lower level ( say parts) are taken into consideration while developing the plan. This the most popular method of arriving at aggregate plan.

Capacity planning
Capacity indicates the ability of the firm to meet the market demand Types of capacity planning • Long range capacity planning • Medium range capacity planning • Short range capacity planning Long range capacity planning • Meets corporate / business objectives • Normally for 3 or more years ahead • Planning of land • Planning of facilities • Planning of technology and equipments • Planning of human resources


Medium range capacity planning • Making of aggregate plans • Normally for 6 to 18 months or more years ahead • Work force reallocation • Inventory management • Work force recruitment • Second shift and third shift operation • Subcontracting ( development and permanent loading) • Make –buy decisions Short tem capacity planning • Normally for 3-6months • Overtime management • Control of inventories ( raw material, WIP and finished goods) • Work force reallocation • Subcontracting • Alternate tooling Capacity requirement planning (CRP) Capacity requirement planning is concerned with determining the following requirement for a Master production schedule.( MPS) • What and when materials are required ( MRP – Material requirement planning) • Machine hours required • Labour hours and categories required Major CRP inputs are: • Planned orders and released orders • Loading information from work centre file ( standard hours for jobs and hours available) • Routing information and alternate routing , if any Major CRP outputs are • Load reports • Revisions to MPS for rescheduling if any • Verfication of materials planned as per MRP system If the load reports indicate inadequacy of capacity, overtime or subcontracting to be resorted to or changes to be made to MPS. Strategies to meet non –uniform demand Strategy 1: Absorbing demand fluctuations by varying inventory levels or allowing backlogs Method1- Produce in earlier period and hold in inventory until the product is demanded Cost- Inventory carrying cost 40

Method 2- deliver product when capacity is available Result- lost revenue, lost customers, unhappy customers Stategy2 : Change production according to demand Method 1- Work additional hours with out changing work force size Cost- overtime pay ( normally double) Method 2- Add work force for higher production Cost- excessive labour charges during period of slack demand Method 3- Sub -contract Cost- company overhead and sub-contact cost Quality and production schedules may be affected Strategy 3 : vary work force according to demand Method1- Hire additional personnel when demand increases Cost- cost of advertisement, interview, training Skilled labour may not be available when needed Method 2- lay-off when demand reduces Cost- cost of lay off ( half pay during lay off) Capital investments are idle Problems; Order position for a certain product is as below Month Units Month 1 13, 000 7 2 12, 000 8 3 10, 000 9 4 9, 000 10 5 11, 000 11 6 13, 000 12 Given: Capacity of shop is10,000 per month on regular basis Overtime capacity is 3000 per month Sub-contract capacity is3000 per month with 3 months lead time Initial inventory is 1000 units Production cost is Rs 5 / unit on regular basis Production cost is Rs 9 / unit on Overtime basis Subcontract cost is Rs 7 / unit Cost of carrying inventory is 1.00 per month per unit

Units 11,000 7, 000 15, 000 13, 000 12,000 10,000


No back log of orders is allowed. Work out the total production cost on: • leveled production basis • No inventory basis and suggest which to be adopted Ans : Plan A : Level production basis Month Units 1 13, 000 2 12, 000 3 10, 000 4 9, 000 5 11, 000 6 13, 000 7 11,000 8 7, 000 9 15, 000 10 13, 000 11 12,000 12 10,000 Total 1, 36, 000 * from initial inventory Regular production 10,000 10, 000 10, 000 10, 000 10, 000 10, 000 10, 000 10, 000 10, 000 10, 000 10, 000 10, 000 1, 20, 000 Overtime production 2000 2000 Subcontract From production Inventory ( stock) nil 1000 nil Inventory carried ( stock)

1000 1000 3000 1000 3000 2000 3000 2000 4000 11,000 3000


Cost of production; 1. Regular basis :1,20, 000 X Rs .5 = Rs. 6, 00, 000 2. Overtime basis: 4000 x Rs 9 = Rs 36, 000 3. Subcontract basis 11, 000 X Rs 7 = Rs 77, 000 4. Inventory carrying cost : 1000 X 1 (month) X Rs 1 + 3000 x 1 x Rs 1 5. Total cost = Rs 7, 17, 000

= Rs 4000

Plan B : No Inventory basis Month Units Regular production 1 2 3 4 5 13, 000 12, 000 10, 000 9, 000 11, 000 10,000 10, 000 10, 000 9, 000 10, 000

Overtime production 2000 2000

Subcontract From production Inventory ( stock) nil 1000 nil



6 7 8 9 10 11 12 Total

13, 000 11,000 7, 000 15, 000 13, 000 12,000 10,000 1, 36, 000

10, 000 10, 000 7, 000 10, 000 10, 000 10, 000 10, 000 1, 16, 000

3000 1000 2000 3000 3000 2000 13000 1000


Cost of production; 1. Regular basis :1,16, 000 X Rs .5 = Rs. 5, 80, 000 2. Overtime basis: 6000 x Rs 9 = Rs 54, 000 3. Subcontract basis 13, 000 X Rs 7 = Rs 91, 000 4. Inventory carrying cost : nil 5. Total cost = Rs 7, 25, 000 Plan A is to be adopted because of lower total production cost.

Production and Operations Management
Module 5: Materials management
Scope of materials management: 1. Amount of materials is high compared to other inputs , and it is increasing year to year. Proper materials management is key to the survival and growth of the company. 2. Cost of materials could be as high as 70-75% of the cost of the product in engineering industries. In other industries it could be between 40- 60 % . Hence reduction in the cost of materials plays an important role in the profitability of a company 3. Materials form a important part of current assets of the organization. Its proper utilization is vital for ROI ( return on Investment) 4. Added value of a product = Value of produced goods- value of materials purchased. It is imperative that not only that purchase cost of materials are to be low but also expenses incurred in purchasing, storing, handling should be as low as possible. 5. Quality of end product depends on quality of input materials. Hence it is important that right quality of products are to be procured at right time. Giving detailed description of requirements to supplier in the Purchase order ensures the same. 6. Materials management is one of the Key centers of accountability for performance. It includes purchasing, handling of materials, maintaining appropriate inventory levels and ensuring storage conditions. 7. Minimizing the use of scarce resources and finding alternatives 8. Ensuring safety during handling and storage of hazardous materials and compiling with regulatory requirements


9. Efficiency of business depends on ensuring right quality of materials in right quantity ant the right time. Otherwise it hampers the production to a great extent. Cost of production shoots up. Primary Objective of materials management 1. Low prices- to be lowest - includes transportation: enhances profit 2. High inventory Turnover- value of inventories to be low in relation to sales. Reduces storage costs 3. Low cost acquisition and possession- reduced handling and storage costs. 4. Continuity of supply- alternative sources, , captive suppliers, flexible suppliers 5. Low payroll costs- Low operating costs of material management personnel 6. Favorable supplier relations- supplier development Secondary objectives of Materials management 1. New materials and products- working closely with Design and research departments for development of new materials and products 2. Economic make-buy- Coordinating and assisting other departments in Make-Buy decisions 3. Standardization- coordinating with Design departments in reducing no. of items. 4. Product improvement- Contribution towards product improvement by giving appropriate inputs and assisting Design department. 5. Interdepartmental Harmony- Success of materials management department depends on the success of other departments . hence relations are to be harmonious 6. Forecasts- Forecasts in terms of prices, availability and general market conditions are to be regularly monitored towards taking important business decisions. Functions of Materials Management 1. Purchasing 2. Vendor selection and rating 3. Material storage and handling 4. Inventory management Purchasing: Objectives of Purchasing; 1. To pay reasonably low prices for best value of products 2. To keep inventories low 3. To develop satisfactory sources of supply 4. To secure good vendor performance 5. To locate new materials or products as required 6. To develop good purchasing policies and procedures 7. To implement programs like value analysis , cost analysis and make-or-buy decisions 8. To keep overheads of the department Low. 9. To have a high degree of coordination with other departments


Low price, inventory low, supply, vendor performance, new materials reqd., good purchasing policies, value analysis, cost & make- buy, low overheads, coordination. Main Functions of Purchasing department 1. Selection of vendors 2. Obtaining quotations/prices 3. Awarding purchase orders 4. Follow-up for delivery 5. Handling complaints , if any 6. Supplier development/ vendor relations 7. Payment of invoices Other functions of purchase department ( in coordination with other departments) 1. Establishing specifications 2. Scheduling orders 3. Inspection 4. Accounting 5. Market research 6. Inventory policy 7. Sale of scrap 8. Customs clearances ( during import of materials) 9. Transportation 10. Make-or-buy decisions Steps in Purchasing 1. Receipt of Purchase requests ( qty, delivery, item description) 2. Development Purchase specifications 3. Obtaining quotations from sources 4. Selection of source 5. Release of purchase order and acceptance by supplier ( technical and commercial terms) 6. Follow up for receipt 7. Checking invoice and approval for payment Vendor / supplier selection is based on the following considerations 1. 2. 3. 4. 5. 6. 7. Availability of Infrastructure ( equipment, building, inspection facilities etc) Availability of human resources ( managerial, workers, Inspectors) Technical capability Meeting delivery requirements Reasonable prices Flexibility to take up variations in demand Willing to work and grow with the company

Normally suppliers are selected on the basis of few trail orders . if the performance is satisfactory , they are included in approved supplier list and future purchase orders are placed on them.


Single source or Multiple sources Single source: 1. Quantities may be very small for multiple sources 2. Supplier may be exclusive ( eg patent) 3. Supplier is outstanding in quality and delivery and no need to consider others 4. Ordering and scheduling is very easy and less costly Multiple sources: 1. Suppliers will be competitive 2. Delivery disruptions cannot be sustained (because of Breakdowns , strike, floods etc) 3. Quantities too huge for one supplier 4. Scheduling flexibility Vendor rating Vendor rating is carried out periodically (once in 6 months / 12 months ) to gauge the performance of the approved supplier and to intimate him regarding improvement if needed. Suppliers may be classified as( example) A-good > 80% B-satisfactory > 60 and < 80% C-unsatisfactory < 60% If the performance is not satisfactory , supplier may be given a chance to improve. If the supplier still falls under not satisfactory category, the supplier may be considered for removal from approved suppliers list Some of the criteria for Vendor rating ( weightages may be given for the criteria ) 1. Quality of products received 2. Delivery performance 3. Price of product 4. Flexibility in meeting demand fluctuations 5. Assistance in Product development 6. Cost reduction suggestions 7. Implementation of Inventory plans / JIT system 8. Credit terms 9. Management competence 10. Financial position Problems Calculate vendor rating with the data below and indicate which supplier is better Weightages for Quality=50; delivery=25; price =15 : response to suggestions = 10 Supplier data Quantity supplied Quantity accepted Price Delivery promised Actual delivery Response to suggestions Supplier A 108 102 Rs 1 3 weeks 2.7 weeks 90% Supplier B 90 90 Rs 1.2 4 weeks 5 weeks 85%


Solution: # 1 2 3 4 5 6 7 8 Description Percentage accepted ( quality ratio) Quality rating Delivery against promise Delivery rating Supplier A 102/108 x 100 =94.4% 94.4 x 50 /100 =47.2% 3/2.7 x 100=111.11% 111.11 x 25/100=27.77% 1/1 x 100 =100% Supplier B 90/90 x 100 = 100% 100 x 50/100 = 50 % 4/5 x 100=80% 80 x 25/100 =20% 1/1.2 x 100=83.33% 83.33 x 15/100 =12.50% 85 x 10/100= 8.5% 91%

Price ratio ( in percentage )= lowest price/supplier price X 100 Price rating 100 x 15/100= 15% Response to suggestions rating Total 90 x 10/100= 9% 98.97%

Supplier A is better. Stores management Functions of stores management 1. To receive materials and account for them 2. To provide adequate and proper storage various materials 3. To ensure proper identification 4. To preserve product from deterioration 5. To receive indents from consuming departments , issue and maintain accounts 6. To minimize obsolescence by stock rotation ( FIFO method) especially shelf life items 7. To highlight stock accumulation, discrepancies and abnormal consumption 8. Ensure good house keeping 9. To ensure efficient material handling 10. To verify stock periodically Stores layout is critical to good stores management. It should have: 1. Adequate storage areas 2. Good lighting 3. Good material handling equipments 4. Safety provisions 5. Areas marked for receipt of material, inspection areas and area for rejected goods 6. Easy access to all storage areas 7. Storage areas are clearly identified for quick location and fast service 8. Good usage of floor space and heights 9. Secure areas for costly items to prevent theft, pilferage. Stock verification is conducted to verify the physical stock against book stock. If the discrepancies are less , it indicates good stores management. Types of stock verification:


Periodic verification- stock is verified once in 6 months or 12 months. Receipts and issues are closed and all materials are checked physically. • Continuous verification- materials are divided into 52 groups and physical stock is checked weekly. This will distribute the stock verification burden over the complete year. Proper classification and codification of various items helps in management of stores in an efficient way. It reduces duplication and enables reduction in sizes and varieties. Some broad classifications are – raw materials, parts, spares, tools, packing materials, hardware Inventory Management Inventory is the materials stocked in order to meet an unexpected demand or distribution in the future. The materials may include Raw materials, Materials in –process, Finished goods, spares, Tools and others. Level of inventories depend on : 1. 2. 3. 4. 5. 6. Nature of product Nature of customer demand Lead times for manufacturing Lead times for procurement Consumption pattern Shelf life of product

Purpose of holding Inventories: 1. Meeting delivery requirements 2. Better utilization of manpower and equipment 3. flexibility in scheduling Carrying Inventories costs money. It increases production cost. Inventory costs are: • Ordering costs - preparation of purchase order, processing payments, Receiving and inspection • Carrying costs- deterioration, pilferage, taxes, insurance, storage, Interest • Capital costs- space, buildings, equipments • Storage space costs- rent, power, maintenance • Service costs- salaries of employees, bonus, security, Record keeping, Overtime • Looses- pilferage, damages, expired products Inventory carrying costs per year may be 20-30% of the value of Inventory. Because of high costs involved in inventories proper management and control assumes importance . Inventory management involves; • Development of policies, systems and procedures • Administration of policies, systems and procedures 48

• •

Close interaction with other functions like customer service, production scheduling, purchasing and transport Inventory control pertains only to administration of policies, systems and procedures

Factors influencing Inventory management and control: 1. Type of product – if the unit cost is high, closer control is needed. Short supply may have to be stocked more. custom built products may have to be stocked more. Standard products may be stocked less. 2. Type of Manufacture - stock out situation should not be allowed to occur. Batch production and intermittent manufacture allows greater flexibility in inventory control. 3. Volume of production – inventory may not increase with volume of production. If products have many components then inventory required may be high. 4. Others- objective of the company, supplier capabilities, information systems, capabilities of personnel Benefits of Inventory management and control: 1. Ensures adequate supply of materials and minimizes stock out situations 2. Reduces costly interruptions in production 3. Keeps down investment in inventories and inventory costs 4. Bring in purchasing economies by monitoring consumption 5. Better utilization of stocks of common materials for various departments 6. Better accountability 7. enables identification of obsolete items and their disposition 8. enables reliable and consistent financial statements Steps in inventory management and control: 1. Determination of optimum inventory levels- too much inventory blocks capital. Less inventory may result in production interruptions. Consumption trends and sales trends offer inputs for fixing the inventory levels. Inventory levels have to be reviewed periodically and adjusted as necessary. 2. Determine degree of control – normally based on value of item. ABC analysis is made and a class items are controlled closely for variations in consumption , stock, record keeping and review. ( A- high value, low , C- low value, high quantities)


3. Plan and design inventory systema. Fixed Quantity system I n v e n t o r y Maximum level E OQ Re order level Safety stock

Lead time Time

b Fixed period system

I n v e n t o r y Fixed periods

Replenishment level

4. Organise structure to manage inventory- responsibility for inventory control, monitoring, keeping records, handling exceptions, raising requests etc ( normally production planning and control) Inventory control techniques • ABC classification- based on identification of “vital few” from ”trivial many”. And controlling the vital few whose rupee value is high. Steps in classification is as follows; o List each item carried in inventory o Determine annual volume and Rupee value of each item o Calculate product of annual volume and rupee value o Compute percentage of each item in terms of total inventory in rupees


o Select top 10% of all items which has the highest rupee percentages and catagorise as ‘A ‘ items o Select next 20% of all items which has the highest rupee percentages and catagorise as ‘B‘ items o Select next 70% of all items which has the highest rupee percentages and catagorise as ‘C ‘ items • • • • VED analysis ( effect on production)– V-vital, E- essential, D- desirable SDE analysis ( based on availability)- S=scarce, D-Difficult, E-easy FSN analysis ( based on consumption)- F-fast moving, S-slow moving, N- non moving Economic order quantity- EOQ is based on TC=DC +D/Q x S + Q/ 2 x H TC = Total cost D=Annual demand C= purchase cost per unit Q =quantity to be ordered ( EOQ) S= cost of placing order H= holding cost per unit D/Q x S = Q/ 2 x H : Q= Sq Rt ( 2DS/H )

When wide variations are there in demand or usage EOQ method does not work satisfactorily. Also inaccurate cost estimates lead to poor calculation of EOQ. EOQ must be modified with judgment. • Minimum –maximum technique Used with manual inventory control systems. Min quantity is and maximum quantity are established. When withdrawal reduces the qty below min . qty. order is placed to bring to maximum level.

Two – Bin TechniqueNormally done for C class items. One bin contains enough to meet the demand between orders. Other contains enough material to take care of consumption between placement of order and receipt. When first bin is an empty order is placed and materials are used from other bin.

• Material requirement Planning ( MRP) For large firms with many different products and products with many components it is accurate and fast to use software for material planning purposes. MRP is such a software . Inputs to MRP are : • Production plan with products, Quantities and delivery requirements • Existing stock levels of various components


• • •

Bill of materials ( BOM) – a list of components that make up the product. They may be brought out, made in house or subcontracted. Purchasing information – products , suppliers and agreed prices Processing information – Production sequence, equipments, production rates

Outputs from MRP are : • Purchase orders on suppliers with Quantities and delivery dates • Production schedule

Purchase information

Customer orders / production Plan Processing information MRP Bill of Materials


Purchase orders

Production Schedules

Just in time ( JIT) The concept originated in japan and adopted by many companies in India.As a concept , JIT means materials arrive on time and no inventories are held at any time. Either in raw materials, WIP or finished goods. Materials are pulled in to the system. JIT system ensures great efficiency in production To ensure a good JIT system the following are essential:  Reliable suppliers  Good processes with least rejections  Break downs of equipment to be very less  Continuous flow of materials with no bottle necks  Low setup times Benefits of JIT are: • Faster through put time • Less or no storage place 52

• • •

Visual control and enhanced quality Greatly reduced production cost Constant flow of Finished goods to customers

Enterprise Resource Planning ( ERP) Enterprise Resource planning is similar to MRP . It can do what MRP can do and much more. ERP is very useful for planning and controlling activities in a very large firm with very many products and operations are carried out in many locations including many countries. ERP system can handle many functions and comes in modules, each of these can be individually used or together . normally the modules are: 1. Sales and marketing 2. Materials 3. Production 4. Financial 5. Human resources Inputs to ERP are : • Production plan with products, Quantities and delivery requirements • Existing stock levels of various components • Bill of materials ( BOM) – a list of components that make up the product. They may be brought out, made in house or subcontracted. • Purchasing information – products , suppliers and agreed prices • Processing information – Production sequence, equipments, production rates • Sales information • Human resource information • Accounting information

Main vendors of ERP are SAP, Oracle, Microsoft. It may take 1-2 years to put all the inputs and get the ERP online. Once the ERP is on line., all transactions are input into ERP system on a daily basis and decisions are taken as per recommendations of the system . With ERP system, the speed of transactions , accuracy and availability of information to various persons for taking decisions are greatly improved. Productivity of personnel is greatly improved. Benefits of ERP are: Tangible benefits: • Reduction of lead time for manufacture • Improvement in delivery performance • Increased Inventory turn over Intangible benefits: • Better customer satisfaction


• • • • •

Improved supplier performance Reduced Quality costs Improved resource utilization Speed and accuracy of information Better decision making capability

Information systems for Material management: Effectiveness of Materials management function is greatly enhanced if supported by good information system. Some of the information computer system can provide are : • Purchasing o Automatic release of orders on approved parties o Status of receipt ( dates, Quantities, acceptance details) o Vendor rating o Payments to vendors o Handling of complaints and corrective actions o Vendor Audit and action taken • Inventory control o Number and value of items in inventory o Trends of consumption o Fast moving, slow moving, and non-moving items o FIFO control ( First- in –first-out) o ABC analysis o Inventory trends ( weekly, monthly etc) • Measurements o Inventory carrying costs o Inventory turns o Stock out or incidences of going below safety levels o Over stock situations

Value Analysis / Value Engineering Value analysis refers to the managerial activity which deals with study of existing products and its components with the objective of reducing the cost and retaining its value or function. This is done by a team of people comprising of , normally, Design, purchase, Methods engineering. Value analysis is done on products which in market but loosing to competitors on price. The following are the steps followed; • Analysis of function of each component to check its contribution • using less expensive material for same function • Combining components to reduce cost • Use of standard parts • Taking ideas from suppliers


Problem1 : ABC analysis: # Unit price( Rs) Consumption 1 1.5 2000 2 7.5 400 3 20 3500 4 80 800 5 4 2000 6 65 500 7 15 750 8 22 800 9 0.5 2000 10 3 600 11 2.5 2000 12 17.5 1500 13 22 1000 14 45 2500 15 350 600 16 30 3500 17 45 700 18 115 200 19 260 450 20 15 2000

Annual value 3000 3000 70, 000 64,000 8000 32, 500 11, 250 17, 600 1000 1800 5000 26250 22, 000 1, 12, 500 2, 10, 000 1, 05, 000 31, 500 23, 000 1, 17, 000 30, 000 8, 94, 400

% 0.335 0.335 7.826 7.155 0.894 3.633 1.257 1.967 0.111 0.201 0.559 2.934 2.459 12.578 23.479 11.739 3.521 2.571 13.081 3.354



Problem 2 : computation of EOQ • No. of tires sold= 9600 • Annual carrying cost is Rs 16 • Ordering cost is Rs 75 Compute EOQ, total cost EOQ = SQRT (( 2 x D x S )/ H )= SQRT (( 2 x 9600 x 75 ) /16 )= 300 tires Problem 3 ; inventory carrying cost • Average inventory = 60 lakhs • Salaries o stores personnel=Rs 2, 75, 000 • Cost of security =Rs 80, 000 • Taxes and insurance = 1% of inventory • Interest rate =20% p.a. 55

• Handling of inventory= Rs 1, 50, 000 • Lost / damage= Rs 20, 000 Compute inventory carrying cost as a percentage of value of inventory Total cost = 2, 75, 000 + 80, 000 + 60, 000 (1/ 100 x 60,00, 000) + 12, 00, 000 ( 20/100 X 60,00,000) + 1, 50, 000 + 20, 000 = 17, 85, 000. Inventory carrying cost as a % of Inventory = 17, 85, 000 / 60,00,000 X 100 = 29.75%


Production and Operations Management
Module 6: Production Scheduling
Production scheduling on the shop floor aims to: • Meet customer demands of Quantity • Meet customer requirements of delivery • Achieve maximum utilization resources ( human and infrastructure) • Achieve lowest production cost Production scheduling methods vary depending on type of product, continuous production or batch production, made to order or made to stock etc. Broadly the sequence of realizing the business plan is as follows; 1. Aggregate planning Determines the production requirements over a period of 6 months to 18 months 2. Master production scheduling Converts production plan into specific material and capacity require nets. This is the beginning of all short range planning 3. Material requirement planning Converts MPS into what materials are required , how much and when. 4. Loading Assignment of jobs to various work centers based on future processing, resource utilization and sequence of operations 5. Sequencing Determines what jobs are to be processed when on each work centre. This depends on priorities of jobs and best utilization 6. Detailed scheduling Determines start and finish dates and times for jobs on each machine. 7. Expediting Actions to ensure scheduling is met by coordination for materials, tools, availability of machines and manpower. 8. Production control Information on status of plan and accruals. Information on problems that may be faced in future period. This helps in taking decisions to meet the aim of production planning and scheduling.


Master Production Scheduling (MPS) MPS is a plan for future production . The plan unit may be weeks, months or Quarter Inputs for MPS • Customer orders • Market forecasts • Inventory levels • Facility loading and capacity information Objectives of MPS • To schedule products to meet Delivery requirements • To fully utilize capacity at lowest production cost Procedure for preparation of MPS 1. Estimate product quantities and due dates ( based on customer orders and Stocking requirements) 2. Decide time period For MPS ( week, month, Quarter) 3. check existing Inventory 4. Calculate load ( no.. of hours ) at each work centers for the time period 5. Check for over loading or under loading work centers Updating of MPS 1. MPS is made as frozen, firm and open ( frozen –no change, firm –change in exceptional cases, open- major changes may be effected0 2. Firm MPS is released for production planning and control 3. Based on actual production and inventories MPS is updated Poorly Designed MPS results in: • Over loaded facilities • Under loaded facilities • Excessive inventories or frequent shortages • Excessive expediting • Unreliable deliveries Detailed scheduling: Detailed scheduling is concerned with identifying and determining • Product and operations to be carried out on specific work centre • Period ( day, week, month) Scheduling depends on volume of orders, nature of operations and job complexity.


Two types of scheduling techniques are used: • Forward scheduling: loading starts as soon as materials are available and work centers are free. No control over when the product may be available. Results in excess inventories. Used where supplier is unable to meet delivery dates. • Backward scheduling: Here the delivery dates is the starting point and the loading date is determined by the lead time taken in each work center working back wards

Facility loading Facility loading is the process of determining which work centre receives which job Loading depends on capacity determined by load schedules, priority sequencing and work centre utilisation. Finite loading – jobs are assigned to work centers based on required hours and hours available. Infinite loading- Jobs are assigned to work centers without regard to available capacity. This requires decisions regarding overtime, subcontracting or delaying selected orders. Load charts helps in visualizing loading and progress; Dept Work centre Turning Milling Grinding Drilling Machine shop Mon Tue Week no Wed 3 Thu Month Fri January 2004 Sat


Priority sequencing Question of sequencing arises when several jobs require same work centre for processing. Priority indicates which is to be loaded first. Some single-criterion priority sequencing rules 1. First in first served-Normally applied at service operations like banks, super bazaars 2. Shortest processing time- Job requiring least processing time is taken first. This may ultimately increase throughput time. 3. Longest processing time-Job with longest processing time is taken first. 4. Least slack job first- slack= available time-processing time 5. Earliest due date job first 6. Truncated shortest processing time- Jobs waiting for more than specified time is given priority 7. Preferred customer order- important customers are given priority 8. Random selection 9. Cost over time- based on ration of delay cost and processing cost 10. Least change over cost- change over is based on overall cost of all change over between jobs Example: Single machine, 6 waiting jobs Jobs Processing time ( mins) A 7 B 6 C 4 D 3 E 2 F 1 Rule: longest processing time first Jobs Processing time ( mins) A 7 B 6 C 4 D 3 E 2 F 1 Total flow time 7 7+6=13 13+4=17 17+3=20 20+2=22 22+1=23

Average flow time = (7+13+17+20+22+23 )/6 = 102/6= 17 mins Rule 2; Shortest processing time first Jobs Processing time ( mins) Total flow time



1 2 3 4 6 7

1 1+2 =3 3+3=6 6+4=10 10+6=16 16+7=23

Average flow time = (1+3+6+10+16+23 )/6 = 59/6= 9.83 mins

Sequencing of ‘n’ jobs on 2 machines. ( Johnson’s rule ) • • Minimum total flow time Minimum idle time

Step 1- List all processing times on two work centers Step2-Scan the processing times Step 3-Select the job with the shortest time. If the shortest time is at first work center , select the job first. If it is at second work center , select the job last. Step 4- remove the job from the list. Step5- continue step 2 to 4 till all jobs are assigned.. If the processing time is same on work centre 1 and 2 , arbitrarily assign either in the beginning or last. Processing time in hours Job Work center 1 A 2 B 4 C 0.75 D 1.5 E 2.0 F 2.0 Sequence : C, D, E ,F , B , A Work center 2 1 2.25 2.5 3.0 4.0 3.5

Calculation of cumulative flow time:









3.0 17 hours





Total flow time = 17 hour Idle time Work center 1= 4.75 hrs Idle time Work center 2= 075 hrs Total idle time =5..5 hrs. Total operation time 12.25 + 16.25 = 28.5 hrs. Check Total operation time + total idle time = twice cycle time 28.5 + 5.5 = 2 x 17= 34 hrs.

Line Balancing Line balancing deals with apportionment of sequential work activities to work stations in order to gain high utilization of labour and equipment and therefore minimize idle time. Steps in line balancing Step 1- determine tasks to be performed to complete one unit of finished product, determine the sequence . Draw a precedence diagram. Step2- estimate task time Step3- determine cycle time to meet desired production ( hourly/ daily etc) Step4 – assign tasks each task to worker and balance the assembly line Analysis of line balancing ; 1. Determination of number of work stations and time available at each work station 2. Group the individual tasks into approximately equal amounts of work at each work station 3. Evaluate the efficiency Grouping of tasks should be at or slightly less than the cycle time or multiples of cycle times. If multiples are present more than one worker will be doing the same job. • • Cycle time = Available time / out put required Theoretical number of workers required:


=( total operation time X out puts per period )/ available time per period per worker. • Balance efficiency = Out put of task time / cycle time x no. of work stations( workers) Balance efficiency = Theoretical no. of workers/ Actual no. of workers

Problem: Precedence diagram . operation time in minutes. D 0.20

A 0.65

B 0.40

C 0.30 E 0.45

F 0.400

G 0.30

Operation time = 7 hours per day Output desired is 550 units per day Cycle time = Available time / output = 7 x 60 / 550 = 0.76 mins Theoretical minimum no. of workers= (0.65 + 0.40 + 0.3 + 0.2 0 + 0.45 0.4 + 0.3 )/0.76 = 2.7 / 0.76= 3.552 Workstation 1 : idle time = 0.11 Workstation 2 : idle time = 0.06 Workstation 3 : idle time = 0..11 Workstation 4 : idle time = 0..06 Total idle time = 0.34 mins Balance efficiency = (2.7 x100)/ 4 x 0.76 = 88.81% Also = 3.552/ 4 X 100 = 88.81

Line of Balance ( LOB) LOB is a technique used for production scheduling and control to ensure committed delivery requirements.


There are 5 stages followed on LOB technique. Stage 1 – Preparation of operation program chart. This is based on lead times for each activity. Delivery date is taken as 0 and worked back wards Stage 2- Preparation of completion schedule Stage 3 – Construction of line of balance chart Stage 4 – Construction of program progress chart Stage 5 – Analysis of progress and corrective action. Left part of chart indicates the week numbers and cumulative number of products to be completed Right side chart indicates the operations required At any period line can be drawn from left hand chart and the quantity of products that should have been completed at various operations can be easily read from the Right hand chart Cumulative completion Quantity Q T Y LOB

1 Week no.

2 Operation stages



Benefits of LOB Technique: • LOB is a planning and controlling technique which enables controlling at each stage of production line • Production problems may be spotted early and necessary actions may be taken • When products are to be delivered as per schedule and there are many processing steps and production lead times, LOB has the greatest advantage.


Production and Operations Management
Module 7: Quality Management Definitions
Quality Degree to which a set of characteristics of a product or service meet requirements Characteristics may be subjective or objective Subjective characteristics may be poor, good, excellent etc. Objective characteristics may be defective parts per million (PPM), complaints, Cost of poor Quality) Characteristics may be: – Physical ( e.g.. Mechanical, electrical, chemical) – Sensory ( e.g.. Smell, touch, taste, sight, hearing) – Behavioral (e.g.. courtesy, honesty) – Temporal (e.g.. Punctuality, availability, reliability) – Ergonomic ( related to human safety) – Functional ( performance oriented) – Others (e.g.. maintainability, reliability, spares support)

Inspection: Inspection deals with verification of products to ensure that product produced meet specified requirements. Main purpose of Inspection is to segregate good products from bad. Inspection may at receiving stage, in process stages and final stage Inspection may be inspection with instruments , testing , visual Inspection may be 100 %, sampling or Audit . extent of inspection depends on cost and risk of bad products being accepted. Quality Control Quality control covers activities that are performed to ensure that product meet requirements. These include right selection of materials, Statistical process control, calibration of instruments, verification of tooling, setup inspections. Quality control activities cover inspection also.


Statistical Quality Control Statistical Quality control deals with the application of statistical techniques for control of processes to produce quality products and also for inspection Variability of a process (Process variation) Each work station in a manufacturing cycle converts inputs to outputs. These processes convert material inputs to value added outputs. The characteristics of Products produced may be: • Dimensional characteristics (eg Length, thickness, diameter) • Form characteristics ( eg. parallelism, ovality) • Physical and chemical properties ( eg. Hardness, chemical composition) If a batch of products is produced, none individual items are not identical. There will always be very small differences. Some times, these differences are apparent only when measurements are taken with high accuracy instruments. Variation in the batch= maximum dimension – minimum dimension These variations are due to two broad causes • Chance causes or Common causes • Special causes or Assignable causes Examples of chance causes are: • slight variation in materials • equipment variations (eg. Run out, play, backlash ,geometric inaccuracies positional accuracy, repeatability) • clearances in fixtures • minute tool wear • variations in environment (temperature, humidity) • slight variation in measurements • Characteristics of chance causes are: • many individual causes are present at the same time • any one cause results in only a very a small amount of variation • cannot be economically eliminated • Output of process follows predictable pattern ( bell curve/ Normal curve)


Examples of Special causes are: • Tool not sharpened when worn out • batch of defective material • component not located properly • power failure • excessive variation in measurements • machine malfunction • setting disturbed Characteristics of Special causes are: • Consists of one or few individual causes • any cause can result in large variation • easy to detect and generally economical to eliminate • no specific pattern n the Output Variation in the process is minimum when only chance causes are present. Also the distribution ( frequency diagram)out put exhibits normal curve.

Distribution pattern (only common causes are present)

Average Process Variation
variation in a process is the total variation that can be expected from the process when very large quantities are produced.


Variation in the process is be computed based on the output values of a batch. Normally the batch should be more 100 components .i.e. there should be at least 100 readings to calculate the process variation. Histogram or frequency diagram is drawn to make sure that only chance causes are present. In other wards the process is under control (statistical control) Suppose N readins are taken, then Standard deviation ( sigma) ( σ ) is calculated from the formula σ = root of ( (( M-X1)2 + ( M-X2)2 + ( M-X3)2 …….( M-XN)2 )/ N-1)) Where M= average of N readings X1, X2 ,X3 ……. XN are individual readings Process variation = 6 times σ or 6 σ Property of Normal curve Average

Process variation (6 σ)

95.4% of readings would lie in this range

68.3% of readings would lie in this range 99.7% of readings would lie in this range

3 out of 1000 reading may fall outside +/- 3 σ limits

In manufacturing operations less variation means better quality. If special causes are present , the variation will be more than 6 σ. Or the pattern would change. This property is used in construction and use of control chats for statistical process control.


The out put of a process has two properties. Process average and process variation (6 sigma) Out put of a process should meet process requirements. Requirements are given in specifications or Drawings. A typical specification has a mean and Tolerance. Example: Length to be 100.0 +0.6mm means product is acceptable if the length is 100.0 or 100.6mm. Alternatively specification can be given as 100.0/100.6. This gives the lower and upper specification limits. Difference between upper specification and lower specification is the tolerance. Two process measurements are normally made to indicate the capability of the process to meet requirements. Namely: • Process capability Cp • Process capability index Cpk Example: 100.3 Specn. mean

100.4 Process average

100.0 LSL

Process variation (6 σ)=0.3 100.6 USL Tolerance =0.6

Process capability = Tolerance/ process variation For the above example, the process variation is 0.3: Process capability = 0.6/0.3 = 2.0 Process capability Index This takes into account both tolerance and specification mean. Cpk is calculated for both upper and lower specification limits and lower of the two, is the Cpk


Cpk ( Upper)= (upper specification- process average)/ 3 sigma = (100.6-100.4)/.15 = 1.33 Cpk ( lower)= (process average –lower specification)/ 3 sigma = (100.4-100.0)/.15 = 2.66 Cpk of the process is 1.33. If the process capability index is equal to 1.33 , the process is considered acceptable. More than 1.33 is desirable. This can take up variations in process average without producing rejects on the long run.

Control charts Control charts were developed by Walter Shewhart in 1920. The chart is based on the principle that the variability of a process is minimum when the process is running under chance causes (common causes) only. Trial batches are produced and process variation ( 6 sigma)is established . Control charts are prepared with control limits calculated on sample sizes . Sample sizes could be 2 to up to 9 . At fixed intervals ( eg, 30 min, one hr, 4 hrs based on production quantity) samples are taken and sample averages are plotted on the chart. When the process is under control, all the points will be • with in the limits • No unnatural patterns will be present • Distribution of points will be denser in the centre and very infrequent at the limits. Any change in the above indicates presence assignable/ special causes (out of statistical control). The process is stopped and actions are taken to eliminate the causes of variation.





Construction of X bar –R chart Step 1 - Choose quality characteristic to be controlled. Step2 - determine sample size ( 3 to 5 is ideal) and no. of samples. Step 3 - Collect samples at fixed intervals and note readings ; no. of samples depends on production rate and total duration of manufacture. Step4 -select No. of subgroups ( K ) Normally total no. of readings required is 75 to125 Step 5 – Calculate mean and range for each sample Example : Sub group no. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 sample size =3 : No. of subgroups=26 parameter for charting -bond strength in grams Sample 1 6.5 6.5 7.0 4.0 2.0 6.0 6.0 6.0 5.5 7.0 4.0 4.0 5.0 6.0 4.0 4.0 5.0 3.0 5.5 7.0 5.0 5.0 4.0 4.0 5.0 2.5 Sample 2 6.5 6.0 5.5 3.0 0.0 6.0 4.0 4.0 5.0 6.0 3.0 3.5 3.5 4.5 6.5 7.0 6.0 6.0 5.0 6.0 5.0 2.5 5.5 0 3.0 5.0 Sample 3 5.0 7.0 5.5 3.5 1.0 6.0 4.0 6.0 4.5 6.0 3.5 3.0 5.0 4.5 5.5 7.0 4.0 6.0 7.5 5.0 5.0 3.5 5.0 2.0 3.5 3.0 Sub group Mean(X-bar) 6.0 6.5 6.0 3.5 1.0 6.0 4.6 5.3 5.0 6.3 3.5 3.5 4.5 5.0 5.3 6.0 5.0 5.0 6.0 6.0 5.0 3.6 4.8 2.0 3.8 3.5 Range ( R ) 1.5 1.0 1.5 1.0 2.0 0 2.0 2.0 1.0 1.0 1.0 1.0 1.5 1.5 2.5 3.0 2.0 3.0 2,5 2.0 0 2.5 1.5 4.0 2.0 2.5


Step 5 – Calculate mean of subgroups ( X-double bar) = (6.0 + 6.5 + ………..+ 3.8 + 3.5 ) / 26 = 4.72 Step 6Calculate mean of ranges ( R-bar) =( 1.5 + 1.0 + ………… + 2.0 + 2,5) / 26 = 1.75 Step 7 - Calculate control limits for X-bar chart and R –chart Use statistical tables below:

Sample size 2 3 4 5

A2 1.88 1.02 0.73 0.58

D3 0 0 0 0

D4 3.27 2.57 2.28 2.11


For X-bar chart: ULC = X-double bar + A2 x R-bar = 4.72 + 1.02 x 1.75 = 6.50 LCL = X-double bar - A2 x R-bar = 4.72 - 1.02 x 1.75 = 2.94 For R chart: ULC = D4 x R-bar = 2.57 x 1.75 = 4.50 LCL = D3 x R-bar = 0 x 1.75 = 0 Step 8 – test for Homogeneity Check sample averages or Ranges fall outside the control limits for any subgroups. • sub group averages for no. 5 and 24 fall below lower control limit • all values in Range are within control limits Step 9 – remove subgroups which are outside control limits . Step 10- Recalculate control limits Modified X- double bar = 4.99 For X chart : Modified UCL = 6.67 : modified LCL= 4.21 For range chart ; Modified ULC = 3.31 : modified LCL=0 Step 11- check for Homogeneity. Repeat the process till all reading are homogeneous. In the example , All 24 subgroups are with in control limits. Step 12- construct control chart for X-bar and R chart X-bar chart UCL = 6.67

Mean =4.99

LCL = 3.31


R chart UCL = 4.21

Mean =1.64

LCL = 0 Types of control charts are: 1. For variable measurements (Quantitative) ( eg. Weight, dimensions): • • • • 2 X-R chart ( mean -Range chart) - constant sample size – most popular X-MR chart ( mean – moving range chart)- for single value per batch Median- range ( middle value –range chart) – for easy calculations X-S chart ( mean –standard deviation chart – for large sample sizes

For Attribute measurements (Qualitative) (OK/not OK, Good/bad): • np chart, - no of defectives – for constant sample size • p chart, - percentage defectives – for varying sample sizes • c chart – no of defects - for constant sample size • u chart – no. of defects per part - for varying sample sizes

Control chart for attributes Sample size = n : No. pf subgroups = K : Number of defectives in sub group = c p= fraction defective = c/n ; p is calculated for each sub group ( p1=c1/n , p2=c2/n ……) p-bar ( average/ mean ) = (c1 + c2 + …….) nK UCL = n x p-bar + 3 Sqrt ( n x p-bar ( 1 - p-bar)) LCL = n x p-bar - 3 Sqrt ( n x p-bar ( 1 - p-bar))


np chart UCL

Mean = p-bar


Acceptance sampling
100 % Inspection is costly and time consuming when quantity to be inspected is large. Sampling inspection is the best way of estimating the quality of incoming or outgoing lots. Acceptance sampling involves taking a random sample from the lot and by inspection of the sample and after inspection to determine whether to accept the lot or not. Sampling may be: • Single sampling • Double sampling • Sequential sampling The sampling plans are based on average outgoing quality levels required on the long run. Based on the these quality levels sample sizes are determined and given in statistical tables. IS 2500 is a standard which gives such a table. Depending on the average outgoing quality levels the tables gives values for lot size, sample size, quantity of defectives that is acceptable. There is always a risk of rejecting good lots and risk of accepting bad lots in any sampling plan. The probability o accepting bad lots is called consumer’s risk . bad lot are defined by LTPD value ( lot tolerance percent defective) and The probability o rejecting good lots is called producer’s risk. Good lots are defined by Acceptable quality levels ( AQL) The graph which gives the characteristics of the sampling plan indicating producers risk and consumers risk is known as OC curve


0.95 OC curve

Probabality of acceptance

0.10 AQL=0.1 LTPD=0.5

Actual percentage defective Average Outgoing Quality level (AOQL) is the percent defectives after lots are accepted and replacement of all defective items on rejected lots. Single sampling Sample is taken only once. If the no. of defects are more than acceptable then the lot is rejected and 100 % inspection is carried out. Double sampling Depending on the number of defectives in the first sample , second sample is drawn and decision is taken. Therte will be an acceptance number c1 and a rejection number c2 fixed during the first sampling. If the value is between this , second sample is taken Sequential sampling Allows more samples to be drawn based on number of defectives in the previous sample .until the lot is accepted or rejected

Quality Circles
Quality circle (QC) is a small group of people who carry out quality improvement activities within their work area. The group may consist of 3 to 5 person normally. Features of Quality circles are: 1. QC activities performed by operating level employees. 2. Voluntary participation 76

3. 4. 5. 6. 7. 8.

Small group of persons in the same work area or doing similar type of work Identify, define and solve problems related to work area QC members meet regularly( every week for an hour in normal) Leads to improved performance I the work area motivates and enriches work life Nature of the problems are of such that they can be solved by themselves with little help form management 9. Good work is recognized by management Quality circles originated in Japan and has spread to other countries. Some of the organisations in India which have very active QC circles are BHEL, BEL, Canara Bank, Indian airlines, Apollo Hospital. Quality Circle Forum of India ( QCFI), a Non-profit national body , Promotes Quality circle movement in India. It has more than 2500 members and more than 25 chapters in various locations in India. QCFI organises Quality circle conventions. QC presentations by circle members and awards are a part of the convention. Some of the don’ts in QC circles: • QC members should not be chosen by management • Problems should not be given by management • Management persons should not be members. Problems taken up by QC s are not restricted to Quality. Productivity improvements, cost reduction, safety, Housekeeping etc. could also be taken up. QCs are not forum for airing grievance or demands. Quality circles are not replacement for task forces, suggestion schemes, Key benefits of Quality circles are: 1. Improved quality, productivity, cost reduction, House keeping, safety etc. which are the objectives for improvement 2. Improvement of Human relations in work area 3. Effective team work 4. Improved communication between employees and management 5. Problem solving capabilities of members 6. Leadership development among members Implementation of QCs Top management must inform their decision to all employees about the implementation of QC program Steering committee to be formed with members from various departments Steering committee should define: • Goals of QC program • Long rage plan for programs • Select facilitator and commit resources 77

• •

Encourage and provide resources for QC meetings Participate in QC presentations

Facilitator: Facilitator forms the link between top management and QCs. Some of the duties of facilitator are: • Co-ordination of training activities for members. • To get support from top management and steering committee • To provide resources. Circle leader: Circle leader is the leader of the circle and must:  Inform status of activities to management  conduct meetings regularly  Monitor circle activities with regard to plan  Maintain enthusiasm and motivate members Circle members: Circle members must participate actively in meetings and discussions. They should develop a good attitude towards Quality, productivity and improvements. Five major steps in implementation of QC program are • Top management orientation • Training for middle management • Training for facilitator, leaders and members • Pilot testing in selected areas • Company –wide implementation Subjects for training for Quality circle include: • Back ground and concept of Quality circles • Structure of QC • Problem solving methodology • 7 QC tools • Mock circle meetings • Presentation skills


Total Quality management
TQM is a Management philosophy and company practices that aim to harness the human and material resources in most effective way to achieve objectives of the organization Total in “Total Quality management” means • All Interested parties are considered • All requirements are addressed • All activities of the organization are covered • All employees are involved TQM-Fundamental concepts Commitment Commitment to TQM by top management is essential. Promotion of this concept at all levels and all activities of the organization is fundamental for success. Every one should be aware of his/her customers (internal and external) Customer satisfaction Understanding customer needs and expectations and striving to meet them should be the key objective Quality losses Quality looses are losses caused by the failure to utilize most effectively the potential of human, financial and material resources in a process. • loss of customer satisfaction • Loss of opportunity to add more value to customers, organization and society • Loss due to waste or misuse of resources Participation by all Abilities of all members in the organization should be fully and effectively utilized. Process measurements Process measurements to be applied to all organization activities Continuous improvements The means of improvement to people and processes performance need to be Continually sought and monitored. Problem identification Provision for identification and resolution of potential and existing problem son a continuing basis is essential Alignment of corporate objectives and individual attitude


Removal of prejudices and restrictive approvals that inhibit effectiveness of the organization needs continuous attention Personal accountability Recognition of individual responsibility and authority should be accepted by all Personal development There should be continuous appraisal, training and development of individuals at all levels

TQM- implementation
1. Policy and strategy of the organization Mission Establish mission statement, corporate objectives, strategy for achieving these objectives and a business plan. Leadership and commitment Have visible and sustained commitment starting from chief executive and extending to every member. Divisional objectives Establish objectives for each level of organization with roles and responsibilities 2 Management of the organization Organization structure Establish effective organization structure Management system Establish, audit and keep under review an effective management system Information system Establish a planned information system through out the organization 3 Improvement of the organization Working environment Structure Physical environment and relationships between individuals and the organization 1Measurement of performance Establish measures of performance of individuals or teams involved in each process Improvement objectives Improvement goals to be closely integrated with corporate objectives Improvement plans Establish plans for improvement of products, service or process quality, safety, environment impact, dependability and customer satisfaction at all levels Monitor and review Ensure that all plans, targets, and measure compliment each other. Review results of improvement plans to measure effectiveness


Some recent trends in TQM
Improve customer satisfaction Implement auditable Quality management system Improve environmental performance Improve safety and Hygiene Enhance social responsibility Identify Improvement opportunities Extensive use of tools and techniques in problem solving Improve supplier performance Reduce lead time Implement ISO9001, QS9000, TS16949, AS9000 as applicable Implement ISO 14001 Implement OSHAS 18001/ ISO 15001 Implement SA 8000 Conduct value stream mapping 7 QC tools 7 Management tools Supplier QMS development Flexible Manufacturing systems Computerization Use of information technology JIT system Integration of suppliers Bench marking, Six sigma initiatives Business process re-engineering Total productive maintenance(TPM) Lean manufacturing Suggestion schemes 5S House keeping Quality circles Quality teams Quality function deployment Design of Experiments Policy deployment ( Goals, objective, Tasks)

Reduce inventory, reduce lead times Effect Quantum leap/ break through improvements

Participation by all employees

Improve product quality Improve planning process


Barriers in implementation of TQM Barriers to implementation of TQM may be divided into two groups. Both of them can be tackled by systematic education, training and participation. Organizational barriers These consist of lack of senior management commitment, unwilling ness and noninvolvement of middle level management. Staff treating themselves as experts and not amenable to suggestions from line people.. Behavioral barriers These may be also called as attitudinal barriers. Artificial organizational structures, negative attitude to changes and improvements, dislike because of previous experiences arte some of the factors. Effects of TQM implementation in a company # 1 2 3 4 5 6 7 8 9 10 11 12 Aspect Top management commitment Policy clarity Participation in improvements Involvement of people Communication Recognition Customer satisfaction Cost of poor quality Training activities Performance measurements Business results Suppliers Before Not visible No policy Very few persons < 10% No or poor communication Seldom low high Almost nil Not focused Stagnant or declining Outsiders keep them in dark, squeeze them. After Highly visible Transparent , detailed All levels >80% Effective communication at all levels Always high Very low Continuous, every one Focused and targeted Steady improvement Willing to work as extension of the company


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