PRODUCTION AND OPERATION MANAGEMENT

MB0044

Q1. State the important considerations for locating an automobile plant.

Ans:- Before looking at the planning process

Selecting a location to a large extent is governed by the flexibility factor based on the type of
industry or service. While some industries are completely dependent upon the location for
survival, other industries may have varied degrees of flexibility. Flexibility in choice is obviously
an advantage and a better decision can be taken.
Factors influencing plant location can be broadly divided into two types namely: general factors
and special factors.
Let us study in detail about the factors influencing an automobile plant location.
General factors
The general factors that influence An automobile plant location are listed as follows:

Availability of land Availability of land plays an important role in determining the plant
location. On several occasions, our plans, calculations and forecasts suggest a particular area
as the best to start an organisation. However, availability of land may be in question. In such
cases, we will have to choose the second best location.

Availability of inputs It is very important for the organisation to get the labour at the right
time and good
quality raw materials. The plant should be located:
Near to the raw material source
At the market place
Close to the market when universally available, so as to minimise the transportation cost

Closeness to market places Advantages of locating the plant near to the market place are:
Consistent supply of goods to the customers
Reduction of the cost of transportation

Communication facilities Communication facility is also an important factor which

influences the location of a plant. Regions with good communication facilities namely postal and
tele communication links should be given priority for the selection of sites.

Infrastructure Infrastructure plays a prominent role in deciding the location. The basic
infrastructure needed in any organisation are:

Power Automobile industries which run day and night require continuous power supply.
So, they should be located near the power stations and should ensure continuous power supply
throughout the year.

Transport Transport facility is a must for facility location and layout of location of the plant.
Timely supply of raw materials to the company and supply of finished goods to the customers is
an important factor. The basic modes of transportation are by air, road, rail, water, and pipeline.
The choice of location should be made depending on these basic modes. Cost of transportation
is also an important criterion for plant location.

Government support The factors that demand additional attention for plant location are the
policies of the state governments and local bodies concerning labour laws, building codes, and
safety.

Housing and recreation Housing and recreation factors also influence the plant location.
Locating a plant with or near to the facilities of good schools, housing and recreation for
employees will have a greater impact on the organisation. These factors seem to be
unimportant, but there is a difference as they motivate the employees and hence the location
decisions.
Special factors
The special factors that influence the plant location are:
Economic stability outside investments
Cultural factors
Wages
Joint ventures support of big time players

Q2. Explain essentials of Project Management Philosophy

Ans-Characteristics of project mindset
Project management is all about the mindset.
a) Time: It is an important parameter in framing the right mindset. It is possible to improve the
pace of the project by reducing the time frame of the process. The mindset is normally to work
out a comfort mode by stretching the time limits.
b) Responsiveness: Responsiveness refers to quickness of response of an individual. The
vibrancy and liveliness of an individual or an organisation are proportional to its capabilities to
respond to evolving processes and structure.
c) Information sharing: Information is power. Information is the master key to todays
business. Information sharing is an important characteristic of the project mindset today. A
seamless flow of information is the key to build a healthy mindset among various stakeholders
in a project.
d) Processes: Project mindset lays emphasis on flexible processes. The major difference in a
process and a system is in its capabilities of providing flexibility to different situational
encounters. Flexible processes greater capabilities of adaptability.
e) Structured planning: Structured planning based on project management life cycle enables
one to easily and conveniently work according to the plan. It also enables efficient use of project
resources and prioritisation of the activities based on resource planning. Hence, having a right
mindset and flexible processes in place is very important for sound project management.

Project evaluation and selection criteria

During project evaluation, the following nine criteria may be considered important:

Relevance:
Is the project relevant to the defined scope in terms of the deliverable product and service?

State-of-the-art technical methodologies:

Check if the state-of-the-art methodologies are adequately described?

Relevance to market:
Has any market analysis been done?
Is there any documentation of the various market opportunities?

Creativity: Creativity is required to understand and develop a project as innovatively as

possible and should be well described in its documents. The project objectives may be
creatively quantified for its measurements.
Are the outcomes of each such objective task clearly defined?

Potential:
Is there an adequate description of the project methodologies and its dissemination which
would be used in future?
Are the potential products or services of future identified?

Project management and work plan:

Is there a project management and work plan?
Are the roles and responsibilities of each project member clearly defined?

Effort justification:
Are the efforts in-line with the work and the objectives to be achieved?
Is there enough competence for doing research?
Is there any value addition to the project?

Typical characteristics of a project- A project is a temporary Endeavour with a finite

completion date undertaken to create a unique product or service. Projects bring form or
function to ideas or needs. Project has a start and an end date. Also, a project is:
A programme of non-routine work bringing about a beneficial change.
Guided by at least one well-engaged sponsor who has both adequate authorities and
resources to charter the project effort.
A multi-disciplinary team brought together for the project.
Scope of work that is well defined.
Constrained by cost, time, and quality.

Project parameters for negotiation

During the course of a project, a team negotiates for one or more of the following constraints:
Scope, cost and schedule objectives
Changes to scope, cost or schedules
Contract terms and conditions
Resources

Value addition of project management

Projects may be completed with one or more of the following undesirable outcomes:
Stretched deadlines
Over stressed team
Wasted resources
Unmet customer functional requirements
Overshot budget
A good project management methodology provides a framework for the processes. It provides
guidelines for the execution of the project that greatly increases the chances of the project being
successful, and therefore provides value to the project. Some of the steps of a good project
management are listed below.
Define the project
Set manageable tasks
Obtain resources
Build a team
Plan and allocate the tasks
Monitor and control the work
Report progress to higher officials
Close down the project when completed
Review the project

Project management players, their roles and responsibilities

The players Project management players are individuals and organizations who are involved in
the project. The players of the project management are:

Project manager: Project manager is the individual responsible for managing the project.

Customer: Customer is the individual or organization that will use the product, that is, the end
result of the project.

Performing organization: Performing organization is the enterprise whose employees are

most directly involved in doing the work of the project.

Sponsor: Sponsor is the individual or group within or external to the performing organization
which funds the project. These players are also called stakeholders of the project. The
individual players are actively involved in the project and play an important role to successfully
complete the project. The players interest may be affected (positively or negatively) by the
outcome (success or failure) of the project. Thus, they have influence over the project and its
results.

Roles and responsibilities

The roles and responsibilities of players while managing projects are given below:
There are a number of projects which an organization works on. It is not possible for one
individual to manage all the projects. There is a team of managers who manage the projects.

There may be different teams working on different projects.

An experienced project manager and his/her team may manage more than one project at a
time.

The project team is responsible for ensuring that the project upon completion, shall deliver the
gain in the business for which it is intended for.

The project team has to properly coordinate with each other working on different aspects of
the project.

The team members are responsible for the completion of the project as per the plans of the
project.

Q3. Several different strategies have been employed to assist in aggregate

planning. Explain these in brief.
Ans-Several different strategies have been employed to assist in aggregate planning. The
strategies are divided into two groups namely pure strategies and mixed strategies. The pure
strategies involve taking up only one type of approach and the production is obtained when only
one of the decision variables is permitted to vary while all others are held constant.
Under the mixed strategies, the production targets are achieved by a combination of
approaches which seeks to utilise resources both in-house and as well external to the
organization. Again, there are several possibilities because different combination can be
developed to meet the production requirements. Then the question is, what is the overall
objective? It is understood that traditionally, the total cost of an aggregate plan is taken into
consideration to decide about its acceptance when several plans are developed. However, it is
also possible that the total time can also be seen as an objective if meeting the timelines
becomes the major issue rather than the cost.
In addition, contractual obligations, union guidelines, in-house policies, and business trends can
also dictate the way the aggregate plan is to be developed.
1 Pure strategies
Three focused or pure strategies are:

Vary production to match demand by changes in employment (Chase demand

strategy): This strategy permits hiring and layoff of workers as required. When the output is to
be increased more workers are added and when the output is to be decreased, workers are
removed.

Produce at a constant rate and use inventories (Level production strategy): This strategy
retains a stable work force producing at a constant output rate. Inventory can be accumulated to
satisfy peak demands. Promotional programs may also be used to shift demand. However, by
producing at a constant rate, it is possible that the entire demand is not met leading to sales
loss in some periods while excess production results in inventory build-up in some cases.

Produce with stable workforce but vary the utilisation rate (Stable work-force strategy):
This strategy retains a stable work force but permits overtime, part-time, and idle time. Some
versions of this strategy leads to a combination of back orders, subcontracting, and use of

inventories. This strategy avoids the detrimental effects of layoff and hence is seen as a stable
strategy. Typically, information technology companies follow this strategy.
2 Features of three strategies
Heizer and Render (2008) have provided a good summary of features of different strategies.
Chase demand strategy:
In this strategy the production output is increased or decreased according the demand. This is
possible if workers are added or removed to vary the input capacity. It also means that if the
system is dominantly automated then it will be either under- utilised or over-utilised as the
situation demands. Some overtime or subcontracting might also be used, but no inventories
would be accumulated.

Level production strategy:

In this case, the production output is held constant irrespective of the changes in demand from
period to period. Usually, the average demand is taken as the constant output. When the
demand exceeds the average output, in some months there is shortage and when the output is
above the average there is surplus and build-up of inventory. However, wherever possible
excess output can be used to accumulate inventory and that inventory be used to meet the
above average demands other time periods. No initial inventory is maintained. In case of
shortages, some back orders could be allowed under a level production, or inventory strategy. If
backorder is not allowed then the result is loss in sales.
Stable work-force strategy:
In this strategy, the work force is maintained at the same level on regular time. Production
output is varied either by overtime or by building up inventory. However, if the demand falls then
the production output is decreased and some workers may become idle. Thus, using overtime
and idle time to meet demand would be a stable work-force strategy.
3 Mixed strategies
In mixed strategies, the aggregate planner has a wide variety of choices by mixing two or more
strategies. The number of mixed strategies in alternative production plans is almost limitless.
However, based on the realities of the situation, the number of practical solutions is limited.
These can be evaluated on a trial-and-error basis to find which plan best satisfies the
requirements, taking cost, employment policies, etc. into account.
4 Mathematical Planning Models
Mathematical models attempt to refine or improve upon the trial-and-error approaches.
However, the solution generated may not be feasible and need to be refined. A popular
technique is the application of transportation algorithm which is a special case of the linearprogramming model. It views the aggregate planning problem as the problem of allocating
capacity (supply) to meet forecast requirements (demand) where supply consists of the
inventory on hand and units that can be produced using regular time (RT), overtime (OT), and
subcontracting (SC), etc. Demand consists of individual-period requirements plus any desired
ending inventory. Costs associated with producing units in the given period or producing them
and carrying them in inventory until a later period are analyzed. Cost is obtained, as in the
standard transportation linear programming format and a least total cost solution.

Q4. Illustrate the different methods by which quality is sought to be achieved

using various tools and techniques
Ans-Quality control techniques are specific activities and procedures adopted using data, for
determining a particular aspect of quality to arrive at decisions which are conclusive. Each
technique developed and tested by senior personnel or consultants will be simple enough to be
understood, implemented, and interpreted by the personnel for their immediate use. The
techniques to be used, the criteria to be adopted and the way of interpreting data are handed
over to them for use. Some of the quality control techniques are:
Quality at the source
Quality control tools
Acceptance sampling

Quality at the source

The concept of quality makes the production worker responsible for inspecting his/her own work
and for taking corrective actions. Since inspection is done immediately after a job is done,
finding the cause of the error with clarity aids in faster rectification. Every worker has the
authority to stop production, if he/she finds some serious defect. This puts responsibility for
quality on the workers and gives them pride in their work. Help should always be available from
the quality control personnel to help workers understand the implications of the above actions.
This brings in cooperation and improves the achievement of quality. The information generated
may be used to effect improvements at the suppliers end also. The entire process brings in
openness, commitment, participation and helps in achieving quality.

Quality control tools

The most popular and widely used tools are called as 7 QC tools. These include flow chart,
check sheet, histogram, pareto analysis, scatter diagram, control chart, and cause and effect
diagram. These are the basic seven quality control tools used for achieving or improving quality.
1) Flow chart Flow chart is a visual representation of a process showing the various steps. It
helps in locating the points at which a problem exists or an improvement is possible. Detailed
data can be collected, analyzed, and methods for correction can be developed using flow
charts. The various steps include:
Listing out the various steps or activities in a particular job
Classifying them as a procedure or a decision
Each decision point generates alternatives. Criteria and consequences that go with decisions
are amenable to evaluate for purposes of assessing quality. The flow chart helps in pin-pointing
the exact points at which errors have crept in.
2) Check sheet - Check sheets are used to record the number of defects, types of defects,
locations at which they are occurring, times at which they are occurring, and workmen by whom
they are occurring. The sheet keeps a record of the frequencies of occurrence with reference to
possible defect causing parameters. It helps to implement a corrective procedure at the point
where the frequencies are more.
3) Histogram Histograms are graphical representations of distribution of data. They are
generally used to record huge volumes of data about a process. They reveal whether the
pattern of distribution has a single peak, or many peaks and also the extent of variation around
the peak value. This helps in identifying whether the problem is serious. The various types of

visual patterns have been established along with relevant interpretations which help us to
identify the problem.
4) Pareto analysis Pareto analysis is a tool for classifying problem areas according to the
degree of importance and attending to the most important ones. Pareto principle, verbally stated
as vital few; trivial many is also called as 80-20 rule, because it is observed that 80 percent of
the problems that we encounter arise out of 20 percent of items.
5) Scatter diagram Scatter diagram is used when we have two variables and want to know
the degree of relationship between them. We can determine if there is a relationship between
the variables and also the degree of extent over a range of values of the variables. Sometimes,
we can observe that there is no relationship, in which we can change one parameter being sure
that it has no effect on the other parameter. Further if there is a relationship between the
variables, it also reveals the type of relation namely positive or negative.
6) Control charts Control charts are used to verify whether a process is under statistical
control. This means the process is subject to variations due to random causes and there are no
variations due to assignable causes. Variables, when they remain within a range, will render the
desired quality in the product and maintain the specifications. This is called the quality of
conformance. The range of permitted deviations is determined by design parameters. Samples
are taken and the mean and range of the variable of each sample (subgroup) is recorded. The
mean of the means of the samples is taken as the central line, and deviations equal to three
times the standard deviation corrected for sample size, are used to determine the control limits.
The control above the mean line is called the Upper Control Limit (UCL) and the control limit
below the mean line is called the Lowe Control Limit (LCL). Assuming normal distribution, we
expect 99.97 percent of all values to lie within the Upper Control Limit (UCL) and Lower Control
Limit (LCL) corresponding to + 3. .
7) Cause and effect diagram Cause and effect diagram represents all the possible causes
which lead to a defect on quality characteristics. The effect is indicated at the end of the arrow
and all the causessy stematically categorized are indicated along branches and sub branches.
These are arranged in such a way that different branches epresenting causes connect the stem
in the direction of the discovery of the problem. When each of them is investigated thoroughly
we will be able to pin-point some factors which cause the problem. We will also observe that a
few of them can have cumulative effect or even a cascading effect. When we observe that we
have excessive defects from a machine, we try to identify all possible sources of the causes of
defects. We make a study of each of them and try to correct it. Usually the causes are identified
by brainstorming and by experimentation.

Acceptance sampling
Acceptance sampling is also known as end of line inspection and categorizing the products
based on sample based inspection. In acceptance sampling method of quality control, the
supplier and customer agree upon accepting a lot, by inspecting a small number taken randomly
from the bulk supply. Out of the sample, if a small number as agreed upon by the parties or as
validated by a sampling scheme, is determined as defective, the lot is accepted. If the number
of defectives is more than the agreed size, the entire lot is rejected. Obviously, risks for the
producer and buyer exist. As the sample size increases and the number of acceptable
defectives decreases, the risk for the buyer decreases.

Q5. Explain the basic competitive priorities considered while formulating

operations strategy by a firm?
Ans:-Operations strategy reflects the long-term goals of an organization in its corporate
strategy. To achieve good results, a clear understanding of the operating advantages and a
good cross functional coordination between functional areas of marketing, production, finance,
and human resources departments are required. Operating advantages depend on its
processes and competitive priorities considered while establishing the capabilities. The basic
competitive priorities are:
Cost
Quality
Time
Flexibility

1 Cost
Cost is one of the primary considerations while marketing a product or a service. Being a low
cost producer, the product accepted by the customer offers sustainability and can outperform
competitors. Lower price and better quality of a product will ensure higher demand and higher
profitability. To estimate the actual cost of production, the operations manager must address
labour, materials, scrap generations, overhead and other initial cost of design and development,
2 Quality
Quality is defined by the customer. The operations manager looks into two important aspects
namely high performance design and consistent quality. High performance design includes
superior features, greater durability, convenience to services, etc where as consistent design
measures the frequency with which the product meets its design specifications and performs
best.
3 Time
Faster delivery time, on-time delivery, and speedy development cycle are the time factors that
operations strategy looks into. Faster delivery time is the time lapsed between the customer
order and the delivery. On-time delivery is the frequency with which the product is delivered on
time. The development speed is the elapsed time from the idea generation up to the final design
and production of products.
4 Flexibility
Flexibility is the ability to provide a wide variety of products, and it measures how fast the
manufacturer can convert its process line used for one product to produce another product after
making the required changes. The two types of flexibilities are:
Customization
Volume flexibility
While customization is the ability of the firm to satisfy the specific needs of each its customer,
the volume flexibility is the ability to accelerate or decelerate the rate of production to handle the
fluctuations in demand. For example, the production of fertilizers of different specifications and
applications.

Q6. Explain briefly the four classification of scheduling strategies?

Ans:-Scheduling strategy differs from organization to organization as it depends on the
quantum of production, size and type of production, companys policy, priorities, etc. Most of

these strategies are concerned with job shop production since the problems encountered is
more when more than one product is produced in the same plant.
Following are the classifications:
Detailed scheduling
Cumulative scheduling
Cumulative-detailed scheduling
Priority decision rules
Let us now discuss these classifications in detail.
1 Detailed scheduling
All job orders from customers are scheduled to the last details. This may not be practical in case
disruptions are there in production line like machine breakdown, absenteeism, etc. (Possible in
airlines, hotels, etc)
2 Cumulative scheduling
The customer orders are pooled to form a cumulative work load and then matched with the
capacity. The work load is then allocated in such a way that immediate periods get allocated to
maximum capacity.
3 Cumulative-detailed combination
This combines both the earlier strategies of firm and flexible nature of work load. Cumulative
work load projections can be used to plan for capacity as needed. As changes happen during
the week, the materials and capacity requirements are updated. The actual time allocated to the
specified job at each work centre is as per the standard hours needed. This is tuned further with
the requirements of the master schedule.
4 Priority decision rules
When a set of orders are to be executed, the question of prioritising arises. These priority
decision rules are scheduling guidelines used independently or in conjunction with any one of
the above three strategies. A priority decision rules shown below are the systematic procedures
for assigning priorities to waiting jobs, and determining the sequence in which jobs are required
to be processed. The major criteria for applying rules are set up costs, idle time of machine and
labor, in-process inventory, percentage of jobs that are late, average number of jobs waiting in
queue, average time to complete job, and standard deviation of time to complete job.
Classifications of priority decision rules A. Single-criteria rules
B. Combined criteria rules (Johnsons rule)
C. Critical ratio scheduling
D. Index method of schedule