OPERATIONS MANAGEMENT

Critical Path Method: (CPM)

Project

A project is an interrelated set of activities that has a definite starting and ending point and
those results in a unique product. That means projects are not repetitive. Few examples of projects
are:

1. Constructing a bridge, dam, highway or building.

2. Producing an airplane, missile or large machine.

3. Introducing a new product.

4. Installing a large computer system.

5. Redesigning the layout of plant or office.

6. Construction of a ship.

7. Fabrication of a steam boiler.

8. Maintenance of major equipments/Plants.

9. Commissioning of a power plant/factory.

10. Conducting National Election.

Network: A network is the graphical representation of the project activities arranged in a logical
sequence and depicting all the interrelationships among them.

Terminologies used in Network diagram:

1. Activity: An activity means work/job. It is a time consuming process. It is represented by an

arrow in the network diagram (AOA system).

2. Event: An event is a specific instant of time marks the start and end of an activity.

3. Critical path: It is the sequence of activities which decides the total project duration.

4. Duration (d): Duration is the estimated or actual time required to complete a task or an

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activity.

5. Total project time: Time to complete the project. In other words, it is the duration of critical
path.

6. Earliest start time (E): It is the earliest possible time at which an activity can start. It is
calculated by moving from 1st to last event in the network diagram.

7. Latest start time (Li): It is the latest possible time by which an activity can start.

8. Earliest finish time (Ej): It is the last event time of the head event. It is calculated by moving
backward in the network diagram.

9. Latest finish time (Lj): It is the last event time of the head event. It is calculated by moving
backward in the network diagram.

10. Float/Slack: Slack is with reference to an event and Float is with reference to an activity.

11. Free float: (Latest Finish Time – Earliest Start Time) – Activity duration.

Rules for Network Construction:

The following are the primary needs for constructing Activity on Arc (AOA) network diagram.

1. The starting event and ending event of an activity are called tail and head event respectively.

2. The network should have a unique starting node. (tail event)

3. The network should have a unique completion node. (head event)

4. No activity should be represented by more than one are ( ) in the network.

5. No two activities should have the same starting node and same ending node.

6. Dummy activity is an imaginary activity indicating precedence relationship only. Duration of

dummy activity is zero.

7. The length of the arrow bears no relationship to the activity time.

8. The arrow in a network identifies the logical condition of dependence.

9. The direction of arrow indicates the direction of workflow.

10. All networks are constructed logically or based on the principle of dependency.

11. No event can be reached in a project before the completion of precedence activity.

12. Every activity in the network should be completed to reach the objective.

13. No set of activities should form a circular loop.

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Network scheduling

The biggest advance in project scheduling since the development of the Gantt chart in 1917 was
made between1956-58. During this period, two new scheduling techniques were developed. These
techniques are

(i) Program evaluation and review technique (PERT)

(ii) Critical path method (CPM)

Steps in using network techniques

1. Plan of project

(a) The project is analyzed by determining all the individual activities (sometimes called
tasks/jobs/operation) that must be performed to complete it.

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(b) A planned sequence of these activities are shown on a network (a graph where arrow and circles
represent the relationship among project activities)

2. Schedule of project

(a) How long it will take to perform each activity is estimated.

(b) In order to locate the critical path, calculation is performed (the longest time chain of sequential
activities which determines the duration of project). This step also provides other information that is
useful in scheduling.

(c) The above information are used to develop a more economical and efficient schedule.

3. Project monitoring

(a) The plan and schedule started above are used to monitor the progress.

(b) Throughout the execution of project, the schedule is revised and updated so that the schedule
represents the current plan and status of progress.

(c) PERT, Critical path, Most likely time estimates.

Expected task time (te) = (t0+ 4tm+ tp)/6

Using this formula, te for different activities are shown below.

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 Resource levelling

There are two types of resource problem

(i) Resource smoothing

(ii) Resource levelling

(i) Resource smoothing:

There may be a ceiling on the availability of resources in a particular period of time. For
instance, only Rs 125 lakh per annum may be available to the project and if unutilized during the
year, the remaining amount lapses. The resource analysis used for this type of case is called
Resource smoothing.

(ii) Resource levelling:

A resource may be required to be used in a uniform manner. For instance, in the present day
labour situation one cannot have 100 labourers yesterday, 30 today and 80 tomorrow. Once a labour
is hired, it is difficult to hire him. The rate of usage of labour has to be uniform. Resource analysis
used for this category of problems is called Resource levelling.

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Application of PERT

First we should clarify the conditions under which PERT may be appropriately used. If your situation
lacks the following features, PERT will yield little benefit.

• First, the project must be one whose activities clearly are distinct and separable.

• Second, the project and activities must all have clear starting and ending dates.

• Third, the project must not be complicated by too many interrelated tasks.

• Fourth, the project must be one whose activities afford alternative sequencing and timing.

Language of PERT:

The PERT language comprises simple symbols and terms. As described in Figure 7.2, key symbol are
those for activity, dummy activity, event, and critical path of the network. Since the critical path
requires the longest time through the network, management should watch it most closely to avoid
unnecessary project delays.

Logic of PERT How does PERT work? It works by following these steps:

1. Clearly identify all activities in the project.

2. Identify the precedence requirements of the activities.

3. Diagram the precedence requirements as a sequence of activities.

4. Estimate the time each activity will take.

5. Calculate the critical path and other project performance criteria, creating the schedule and plan
for subsequent control criteria, creating the schedule and plan for subsequent control.

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6. Re-evaluate and revise as experience dictates.

Time estimates are obtained from either past data or from people experienced in a particular
activity. Optimistic t0, pessimistic tp, and most likely tm times must be estimated so that the
expected (average) time te can be calculated from the following equation.

te=(t0 + 4tm + tp)/6

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UNIT II

Facility Layout Design/Decision Types :

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Layout Methodologies:

Distance Minimising:

The material flow effectiveness matrix:

Minimization of the material flow efficiency is a very often used improvement aim in practice.
Material flow efficiency is the multiplication of material flow quantity data and distance data.

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Refer Book for Computer software system (CRAFT, CORELAP, ALDEP)

UNIT V

Work Measurement:

It is the determination of the degree and quantity of labor in performing tasks. It is actual
quantifying of performance dimensions. Managers are used to measuring work in terms of "hours of
work done". In many cases, this provides very inaccurate data on performance.

With performance measurements which depend on establishing standards, we can

determine how well a process is proceeding to forecast the end conditions. The fundamental
purpose of work measurement is to set time standards for work. Standards are needed for several
reasons: One reason is the need to measure performance, which requires a comparison of
accomplishment against a standard. Performance data is needed so that one can avoid surprises
when one has to make decisions.

All scheduling requires some estimate of how much time it takes to do the work. Standards
are necessary to schedule work and allocate capacity. Standards are used in industry as a basis for
payments to workers where output based incentive plans employed.

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There are many techniques used to measure work. However, they can be classified into those that
rely either on direct observation of the work or indirect observation of the work. Some techniques,
such as motion-time systems or standard data can provide standard times from simulation, etc.
However, the data on which such techniques are based, are based on earlier observations of actual
work.

Work Measurement Techniques: There are six basic ways of establishing a time (work) standard:

• Ignoring formal work measurement

• Using the historical data approach

• Using the direct time study approach

• Using the predetermined time study approach

• Using the work sampling approach

• Combining approaches 2 through 5

Ignoring Formal Work Measurement:

For many jobs in many organizations, especially in the labor-intense service sector, formal
labor standards are simply not set at all. The issue of a fair day's work for a fair day's pay is ignored.
Even though there is no explicit basis for criticism, workers may be blamed for poor performance
and inefficiency. Often, because management has not established a work (time) standard, some
informal standard is established by default. Since this informal standard generally compares
unfavourably with those set by other techniques, we do not recommend ignoring formal work
measurement.

Historical Data Approach: This method assumes that past performance is normal performance. In
the absence of other formal techniques, some managers use part performance as their main guide
in setting standards. What are the advantages of these methods. Basically, it is quick, simple,
inexpensive, and probably better than ignoring formal work measurement altogether. The major

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disadvantage, as you can reason, is that past performance might not at all be what an average
worker can reasonably be expected to perform under average working conditions.

Direct Time Study: Often called a time study, a stopwatch study, or clocking the job, this technique is
certainly the most widely used method for establishing work standards in manufacturing. Perhaps
you have observed a job being studied by an industrial engineer, clipboard and stopwatch in hand.
How does direct time study work? Basically there are six

Steps in the procedure:

• Select the job to be timed: The direct time study approach depends upon direct observation and is
therefore limited to jobs that already exist. The job selected should be standardized, in terms of
equipment and materials, and the worker should be representative of all workers doing the job.

• Select a job cycle: Identify the elements and tasks that constitute a complete cycle.

Decided how many cycles you want to time with a stopwatch.

• Time the job for all cycles and rate the worker: Workers behave in varying ways when their
performances are being recorded; common reactions are resentments, nervousness, and slowing
the work pace. To minimize these effects, repeated study, study across several workers, and
standing by one worker while studying a job somewhere nearby, perhaps in another department,
can be helpful. You can assign the worker a rating, as a percentage of the "normal" or average
worker. Industrial engineers frequently use a rating factor when timing jobs. In essence the engineer
is judging the worker as 85 percent normal, 90 percent normal, or some other rating depending on
his or her perception of "normal." Obviously, ratings of this kind depend on subjective judgments.
Compute the normal time based on the average cycle time and the worker rating. Determine the
fraction of time available, making allowances for personal needs; delays, and fatigue, Set the
performance standard (standard time) based on the normal time and the allowances.

Predetermined Time Study: For setting standards for jobs that are not currently being performed
but are being planned, the predetermined time study is helpful. A predetermined time study can
also be applied to existing jobs as an alternative to a direct time study. The bases of this technique
are the stopwatch time study and time study from films.

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UNIT III (MRP & MRP II):

MRP:

Introduction

Material Requirements Planning (MRP) is a computer-based production planning and

inventory control system. MRP is concerned with both production scheduling and inventory control.
It is a material control system that attempts to keep adequate inventory levels to assure that
required materials are available when needed. MRP is applicable in situations of multiple items with
complex bills of materials.

The major objectives of an MRP system are to simultaneously:-

1. Ensure the availability of materials, components and products for planned production and for
customer delivery,

2. Maintain the lowest possible level of inventory,

3. Plan manufacturing activities, delivery schedules and purchasing activities

Inputs to MRP system

There are three major inputs for an MRP system. They are

1. Master production schedule,

2. Bill of Material

3. Inventory status records

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Without these basic inputs the MRP system cannot function.

1. Master production schedule

The demand for end items is scheduled over a number of time periods and recorded on a master
production schedule (MPS). The master production schedule expresses how much of each item is
wanted and when it is wanted. The MPS is developed from forecasts and firm, the customer orders
for end items, safety stock requirements and internal orders. MRP takes the master schedule for end
items and translates it into individual time-phased component requirements.

2.Bill of Materials (BOM): The BOM identifies how each end product is manufactured,specifying all
subcomponents items, their sequence of buildup, their quantity in each finished unit, and the work
centers performing the buildup sequence.

A bill of materials (BOM) file gives the complete product descriptions and documents quantities of
each component, part, ingredient, or raw material needed to make that product or sub-assembly. It
is also called as the product structure tree.

A sample product structure tree is shown below.

For producing 1 unit of product A, 4 units of B and 2 units of C are required.

For producing 1 unit of product B, 2 units of D and 1 unit of E are required.

For producing 1 unit of product C, 3 units of D and 2 units of F are required

Product Structure Tree.

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3. Inventory status records

The MRP system must retain an up to date file of the inventory status of each item in the
product structure. This file provides accurate information about the availability of every items
controlled by the MRP system which can then maintain an accurate accounting of all inventory
transaction, both actual and planned.

The following inventory status records goes as input to the MRP system

1. Item

2. Supplier

3. Lot size

4. Safety stock

5. Lead time

6. On hand inventory

7. Allotted

8. Level

i) Item: Name or number for the item being scheduled.

ii) Supplier: Name or number for the of the supplier for the scheduled item.

iii) Lot size: Several lot sizing techniques are available. Few of them are listed below.

a) Lot-For-Lot (LFL) ordering.

The lot-for-lot (LFL) is the simplest approach and it calls for producing in period the net requirements
for period t. The LFL approach minimizes the holding cost by producing just-in-time.

b) Economic Ordering Quantity (EOQ):

EOQ is a fixed quantity which is ordered whenever the inventory level reaches predetermined level.

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MRP Output

The primary outputs of MRP are the following:

1. Recommendations of planned order releases.

2. Rescheduling notices changing open-order due dates.

3. Notices to cancel or suspend open orders.

4. Item-status-analysis backup data.

5. Future planned order schedules.

MRP II

Manufacturing Resources Planning (MRP II)

Manufacturing resources planning (MRP II) is an extended form of closed loop MRP that also
incorporates strategic planning processes, business planning, and anumber of other business
functions such as human resources planning, profit calculation and cash flow analysis. MRP II uses
the master production schedule as the basis for scheduling capacity, shipments, tool changes, some
design work, and cash flow. Hence it requires several additions to the reference files. One is a bill of
resources, which details key resources needed to produce one unit of product. These resources may
include labour, machinery, tools, space and materials.

The MRP II system can use the bill of resources to project shortages at specific times, giving
departments advance notice of required remedial action: for example, of the need to hire or train
labour. MRP II can also project needs for support resources;

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For example, design engineering support if a customer order entails prior design work.

This additional resource is added to the bill of resources. Given still more reference data,
MRP II can keep track of tool wear and recommend when to replace or reshape tooling. It can also
keep track of machine loads and project machine capacity shortages, which may signal a need for
more machines or a subcontractor

For financial planning, MRP II treats cash flow almost like materials. The MPS is first
exploded into component parts requirements; the system then calculates the cost and payment
dates of all planned order releases, effectively creating a cash flow forecast. This includes not just
payments to suppliers, but also wages, power and other consumables associated with production.
Cash outflows may be projected for a year or more by expense category, work centre or
department, making budgeting much simpler than it would be without an MRP II system.

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Master Production Schedule

The MPS is a statement of the planned production of finished products that will meet the
demand on time, within the organization’s capacity. The master production schedule expresses.
What we intend to make, how much we intend to make and when we intend to make. The demand
for end items is scheduled over a number of time periods and recorded on a master production
schedule (MPS).The MPS is developed from forecasts and firm customer orders for end items, safety
stock requirements and internal orders.

MRP takes the master schedule for end items and translates it into individual time-phased
component requirements.

Capacity Planning:

Capacity planning essentially involves the following categories.

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Resource Requirements Planning:

Resource requirements planning refers to the planning of the overall capacities of the firm.
This planning is done to validate the aggregate production plans of the firm.

Rough Cut Capacity Planning (RCCP):

Rough cut capacity planning (RCCP) involves planning capacities at key / bottleneck work centers
and broadly balancing workloads. It thus validates the MPS.

Material requirements planning (MRP) uses a master production schedule (MPS) of end items to
determine the quantity and timing of component part production. MRP is capacity insensitive; it
implicitly assumes that sufficient capacity is available to produce components at the time they’re
needed.

Capacity Requirements Planning

Capacity requirements planning (CRP) is a computer-based extension of the MRP process

that uses the results of MRP along with detailed production information and labor information to
calculate planned workloads. It is a detailed capacity analysis that helps in validating the MRP
schedule. CRP arises mainly due to batching of production work orders in the course of MRP. It is
thus a computerized system that projects load from material requirements plan.

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