Definition- ‘Operations Management’

Operation Management is in charge of managing the conversion process. This unit

handles the day-to-day running of the business to ensure operations within the
organization are carried out smoothly. It is also in charge of production
administration, manufacturing, and other processes like the rendering of services.

In short, everything regarding involves utilizing resources such as designing,

implementation, and control is the duty of operation management. 
Operations management is the administration of business practices to create the
highest level of efficiency possible within an organization. It is concerned with
converting materials and labor into goods and services as efficiently as possible to
maximize the profit of an organization. 
Operations management handles various strategic issues, including determining the
size of manufacturing plants and project management methods and implementing the
structure of information technology networks.
Key Functions of Operations Management

Operation managers are not only found in a company but also  in  manufacturing
units. They are required to perform various functions as a part of their job
responsibilities. Some of the key functions of an Operations Manager includes:
1. Finance
Finance plays a chief role in operations management. It is essential to ensure that the
organization’s finance has been utilized properly to carry out major functions such as
the creation of goods or services so that the customer’s needs could be satisfied.

2. Operation
This function in operation management is mainly concerned with planning,
organising, directing and controlling all the activities of an organisation which helps
in converting the raw materials and human efforts into valuable goods and services for
satisfying customer needs.

3. Strategy
Strategy in operation management refers to planning tactics that could help them to
optimise the resources and have a competitive edge over others. Business strategies
imply to supply chain configuration, sales, capacity to hold money, optimum
utilisation of human resources and many more.

4. Design of the product

Incorporating innovative technologies play a crucial role in the selling of a product.
Thus it is the duty of operations manager to ensure that the product is designed
catering to the market trends and needs of the customers. The modern-day customers
are more concerned about the quality of the product than its quantity. So, the operation
managers focus on producing top-notch quality products.

5. Forecasting
Forecasting refers to the process of making an estimation regarding certain events that
might occur in the future. In operation management, forecasting refers to the
estimation of customer’s demand so that production can be done accordingly. Through
this, the manager gets to know what to produce, when to produce and how to produce
in accordance with the customer’s needs.

6. Supply Chain Configuration

The main motive of Supply Chain Configuration is to ensure effective management,
monitoring and controlling of all the main activities that are held in a firm. The supply
chain configuration starts from the supply of the raw materials and continues till the
production of the final product and then their selling to the customers which will
satisfy their needs and wants.

7. Managing the Quality

Quality management plays an imperative role in selling a product. The operation

managers allocate the task of quality management to a team and then supervise their
task. The managers identify project defects and rectify them to ensure quality. For
this, certain systems are used that measure and maintain the quality of the product.
Trends and Issues:

There are multiple challenges that operations managers face on a daily basis; this blog
highlights the following five: globalization, sustainability, ethical conduct, ineffective
communication, and system design.
globalization
“a process of interaction and integration among the people, companies, and
governments of different nations.” It is driven by a reduction in trade barriers,
advancements in information technology, and transportation technology. Operation
managers face competition from the company across the street, as well as, from across
the country and across the world.
companies who compete with others abroad will have to improve quality while
lowering prices to remain competitive. This falls on the operations manager as he or
she is the one who “engages in the four functions of planning, organizing, leading, and
controlling to ensure that the product or service remains competitive in the market.”
Sustainability

RECENT TRENDS IN OPERATIONS MANAGEMENT

The ever-shrinking product lifecycles, the new trends on the labor market, the
environmental concerns, and the digitalization of the processes require innovative
approaches to operations management. Some of the trends that have a significant
impact on the discipline today are:

1-Business Process Reengineering (BPR)

It’s a radical approach to designing core processes: take everything that you used
before, discard it, and then start again from scratch. With Business Process
Reengineering, you can foster innovation and improve any selected measures
dramatically. If you want to do it well, focus on how you can add more value to the
customer.
2-Lean and agile manufacturing

Established by the Toyota Corporation, the term lean manufacturing has become a
mainstream trend in the industry, and it is used interchangeable with Just-In-Time
production. The concept behind is a constant improvement of processes in order to
reduce waste and inventory, and maximize the output of high-quality, low-cost
products and services.

A new twist on this concept is agile, or otherwise known as “the new lean.” It has its
origins in software development but now is used by various industries. The reason it
came to life was the growing complexity of processes, and it is characterized by
product development done in small increments and super-fast decision-making. These
together ensure the necessary flexibility and interactivity, proven remedies for
unpredictable changes in market demand.

3-Six Sigma

Improving processes using a data-driven approach is an innovation of Motorola from

mid-1980. It’s still among the trends of impact because it is a quality-improvement
and cost-reducing method that focuses on customer satisfaction.

The method is based on the Six Sigma measure, which is achieved if only 3.4 defects
are found in a million of output. This way, production efficiency can be nearly 100%.
When presented with a problem, the Six Sigma approach uses a five-step method
called DMAIC, an acronym of define, measure, analyze, improve and control.

4-Reconfigurable manufacturing system (RMS)

Another possible method for reacting to quick changes in the market is RMS, a
production system that can be used with different functionalities within a product
family. With an RMS, you can make adjustments in production cost-effectively.
5-Employee involvement

A recent trend that impacts the human resources management activities in operations
is the increasing involvement of employees in the planning processes. Listening to the
opinions of the workers often brings up fresh ideas, a different perspective on what
problems should be solved and how to make the operations more effective.

6-Sustainability

Due to the ever constraining environmental regulations, businesses must operate under

pressure to reduce their harmful impact while still being able to grow. The issues,
since affecting all levels of operations, need the insights of operations management on
what are the options to meet these new expectations.

Many times, principles applied for efficiency coincide with sustainable operations
management principles, like organizing resources or cut times and waste.

7-Behavioural operations management

This trending research area studies the impact of human behavior, especially non-
rational decision-making, on the discipline. Because of its complexity, operations
management is a field prone to frequent deviances in problem-solving.

There is a solid interest to understand the most important factors that influence
manager’s decisions, as well as to make efficient problem-solving methods more
widely available. With such a toolbox, managers can make more rational decisions
and improve the overall efficiency of the operations.

Product Development Process:

Concept:

The product development process encompasses all steps needed to take a product from
concept to market availability. This includes identifying a market need, researching
the competitive landscape, conceptualizing a solution, developing a product roadmap,
building a minimum viable product, etc.
The new product development process in 6 steps

New product development is the process of bringing an original product idea to

market. Although it differs by industry, it can essentially be broken down into five
stages: ideation, research, planning, prototyping, sourcing, and costing.

1. Idea generation – The New Product Development Process

The new product development process starts with idea generation. Idea generation
refers to the systematic search for new-product ideas. Typically, a company generates
hundreds of ideas, maybe even thousands, to find a handful of good ones in the end.
Two sources of new ideas can be identified:
  Internal idea sources: the company finds new ideas internally. That means
R&D, but also contributions from employees.

 External idea sources: the company finds new ideas externally. This refers to
all kinds of external sources, e.g. distributors and suppliers, but also
competitors. The most important external source are customers, because the
new product development process should focus on creating customer value.

2. Idea screening – The New Product Development Process

The next step in the new product development process is idea screening. Idea
screening means nothing else than filtering the ideas to pick out good ones. In other
words, all ideas generated are screened to spot good ones and drop poor ones as soon
as possible. While the purpose of idea generation was to create a large number of
ideas, the purpose of the succeeding stages is to reduce that number. The reason is that
product development costs rise greatly in later stages. Therefore, the company would
like to go ahead only with those product ideas that will turn into profitable products.
Dropping the poor ideas as soon as possible is, consequently, of crucial importance.

3. Concept development and Testing – The New Product Development Process

To go on in the new product development process, attractive ideas must be developed
into a product concept. A product concept is a detailed version of the new-product
idea stated in meaningful consumer terms. You should distinguish

 A product idea à an idea for a possible product

 A product concept à a detailed version of the idea stated in meaningful

consumer terms

 A product image à the way consumers perceive an actual or potential product.

4. Marketing strategy development – The New Product Development Process

The next step in the new product development process is the marketing strategy
development. When a promising concept has been developed and tested, it is time to
design an initial marketing strategy for the new product based on the product concept
for introducing this new product to the market.
The marketing strategy statement consists of three parts and should be formulated
carefully:

 A description of the target market, the planned value proposition, and the sales,
market share and profit goals for the first few years

 An outline of the product’s planned price, distribution and marketing budget

for the first year

 The planned long-term sales, profit goals and the marketing mix strategy.

5. Business analysis – The New Product Development Process

Once decided upon a product concept and marketing strategy, management can
evaluate the business attractiveness of the proposed new product. The fifth step in the
new product development process involves a review of the sales, costs and profit
projections for the new product to find out whether these factors satisfy the company’s
objectives. If they do, the product can be moved on to the product development stage.

In order to estimate sales, the company could look at the sales history of similar
products and conduct market surveys. Then, it should be able to estimate minimum
and maximum sales to assess the range of risk. When the sales forecast is prepared,
the firm can estimate the expected costs and profits for a product, including
marketing, R&D, operations etc. All the sales and costs figures together can
eventually be used to analyse the new product’s financial attractiveness.

6. Product development – The New Product Development Process

The new product development process goes on with the actual product development.
Up to this point, for many new product concepts, there may exist only a word
description, a drawing or perhaps a rough prototype. But if the product concept passes
the business test, it must be developed into a physical product to ensure that the
product idea can be turned into a workable market offering. The problem is, though,
that at this stage, R&D and engineering costs cause a huge jump in investment.

7. Test marketing – The New Product Development Process

The last stage before commercialisation in the new product development process is
test marketing. In this stage of the new product development process, the product and
its proposed marketing programme are tested in realistic market settings. Therefore,
test marketing gives the marketer experience with marketing the product before going
to the great expense of full introduction. In fact, it allows the company to test the
product and its entire marketing programme, including targeting and positioning
strategy, advertising, distributions, packaging etc. before the full investment is made.

8. Commercialisation
Test marketing has given management the information needed to make the final
decision: launch or do not launch the new product. The final stage in the new product
development process is commercialisation. Commercialisation means nothing else
than introducing a new product into the market. At this point, the highest costs are
incurred: the company may need to build or rent a manufacturing facility. Large
amounts may be spent on advertising, sales promotion and other marketing efforts in
the first year.

7 Essential IT Tools For Product Development

For organizations involved in product development, IT is essential for smooth

operations and quality products. A report by Harvard Business Review Analytics
Services states that nine technologies are required for organizations that are into
product development and manufacturing. The report also says that organizations were
twice as likely to be highly satisfied with new product development if the IT
department was a true partner in the process.

Below are the most essential technologies that are viewed as essential tools for
developing better products and ensuring success.

[1] Product requirements management – Product requirements management helps a

product designer add relevant features that will cater to the needs and estimate the raw
material requirements accordingly. This also helps decide the time period required and
cost per unit.
[2] Supplier management – Requirement analysis will provide clear insights into the
raw materials required. Once the raw materials are known, it would be easier for the
procurement team to analyze and find out the suppliers based on their expertise, track
record, costing etc. An IT application to manage suppliers, their billing cycle, quantity
of raw materials procured from different suppliers etc. will help the operations
manager to plan the production accordingly.

[3] Design and Analysis tools – This helps the product designer make innovative
product designs based on requirements. Well known tools are CAD/CAM/CAE etc.

[4] Workflow management tools – The sequential flow of processes in a production

environment which helps convert raw materials to finished products is termed as
workflow. An organized system that manages the complete workflow is very essential
for accuracy and consistency in processes.

[5] Testing tools – Quality management tools or testing tools ensure that the finished
product abides by the accepted standards and is of the highest quality.

[6] ERP & related tools – ERP is a popular tool that automates the complete business
process and ensures efficiency in the production process, supporting the business from
end-to-end. ERP is always integrated with various other tools across business
processes and is able to capture data that is accurate and consistent all throughout.

[7] Collaborative tools – Tools that enhance collaboration with partners, vendors and
distribution channels are given equal importance. The rising dependence on third
parties for many business processes demands enhanced IT tools for better
collaboration and transactions.

Design of Manufacturing Process:

Determinants of Process Characteristics in Operations,

All operations processes have one thing in common, they all take their ‘inputs’ like,
raw materials, knowledge, capital, equipment and time and transform them into
outputs (goods and services).  They do this in different ways, and the main four are
known as the Four V’s, Volume, Variety, Variation and Visibility.

1. The Volume Dimension

A great example of this can be seen by looking at a fast food giant, such
as McDonalds.

They are a well known example of high volume low cost hamburger and fast food
production.   The volume of their operation is key to how their business is organised. 
Essential to their operation is the repeatability of the tasks, as well as the
systemisation of the work. From this, standards and procedures drive the way in which
each part of the job is carried out and then by combining in this way provides the
organisation with a low cost base. In contrast a local café or restaurant will have a
much lower  volume of output, less labour, less systemisation, and each staff member
completes a wider variety of tasks which results in higher unit costs.

2. The Variety Dimension

A common example used to describe the variety dimension is the contrast between a
taxi and a bus service.  Both offer hired transportation services but a taxi service has a
much higher variety dimension as they will basically pick you up and drop you off
wherever it is you need to go.  A bus can only provide a defined route and schedule. 
Whilst they offer a similar service, variety and flexibility is high for the taxi company
and low for the bus company. It is worth noting here that a low cost model is more
easily achieved with less variety.
 3. The Variation Dimension
Consider two home building contractors.  One offers prefabricated homes that you
choose from a catalogue or online.  It is transferred to site and erected over the course
of a few days.  The second building company offers customised homes they have
display homes they have built that you can walk through. Each aspect of the home
from the façade to the number of bedrooms to the floor materials to the type of heating
can all be customised to the customer.  The design and build phase can take anywhere
between 24 weeks to 52 weeks.   Company two will have a much higher level of cost
and lower volume than company one who offers standard pricing and can control
costs much more easily.
 4. The Visibility Dimension
This dimension refers to a customers ability to see, track their experience or order
through the operations process.  A high visibility dimension includes courier
companies where you can track your package online or a retail store where you pick
up the goods and purchase them over the counter.  A low visibility dimension could be
a web design company who takes your order and advises your new website will be
ready in 4 – 8 weeks.  The service skill of employees will greatly affect the customers’
experience.

Types of Processes

Five Types of Manufacturing Processes

1. Repetitive Manufacturing
2. Discrete Manufacturing
3. Job Shop Manufacturing
4. Process Manufacturing (Continuous)
5. Process Manufacturing (Batch)

1. Repetitive Manufacturing

A manufacturer would use repetitive manufacturing for repeated production that

commits to a production rate.  

Repetitive processing is comprised of dedicated production lines that produce the

same or a paraphernalia of items, 24/7, all year round.  

With its requirements for setup being minimal or having little changeover, the
operation speeds can be increased or decreased to meet customer demands or
requirements.  
2. Discrete Manufacturing

Like repetitive manufacturing, discrete manufacturing also utilizes an assembly or

production line. However, this process is extremely diverse, with a variation of setups
and changeover frequencies. This is due to factors based on whether the products in
production are similar or discordant in design. 

If the items are vastly different this will require altering the setup and a tear-down,
which means production will require more time.  

3. Job Shop Manufacturing

Job shop manufacturing, unlike repetitive or discrete manufacturing, makes use of

production areas rather than assembly lines. This is because this process will produce
smaller batches of custom products, which can be either made-to-order (MTO) or
made-to-stock (MTS). 

These workstations are organized to make one version of a custom product, or even a
couple of dozen. If customer demand requires it, the operation can become a
discrete manufacturing line with selected labor operations being, potentially, replaced
by automated equipment.  

Of course, this depends on the type of manufacturing business.  

4. Process Manufacturing (Continuous)

Process manufacturing (also called continuous manufacturing) is similar to repetitive

manufacturing as it too also runs 24/7. However, the difference is that this
manufacturing process productions raw materials are gases, liquids, powders, or
slurries. But, in areas like mining, the products can be granule materials.

Product designs are similar, unless the disciplines to create a final product or a
production process is more diverse.
5. Process Manufacturing (Batch)

Process manufacturing (also called batch manufacturing) shares similarities with

discrete and job shop processes. Depending on consumer demand, one batch could be
enough to meet that demand. Once a batch is completed, the equipment is cleaned,
ready to produce the next batch when needed. Batch processes are continuous in
nature.

Product-Process Matrix:

The product–process matrix is a model that is used to demonstrate the combination of

a product's (or product group's) Volume and Variety characteristics and the nature of
the processes that makes it.
The product‐process matrix is also used as a tool for evaluating the extent of
alignment between the marketing strategy and the manufacturing process.
Product dimensions (Horizontal) is the life cycle of a typical product ranging from
unique-one of a kind to high volume standardized product.
•Product typically evolves from left to right.
•Process dimensions (Vertical) the different processes are represented ranging from
project to a continuous process.
•Ideal to position along the diagonal on the matrix.
•Some companies move to a middle ground by adopting flexible manufacturing and
modular product design

Design of Service Systems.

Section – B

Facility Location: importance

Facility location is a crucial element in the supply chain and has a great impact on the
efficiency of numerous logistics activities. Facility locations involve numerous
aspects, such as the location of manufacturing plants, assembly locations as well as
distribution centres. The location of the facility plays a vital role in the success of
logistics networks.
Facility location may be defined as a place where the facility will be set up for
producing goods or services. The need for location selection may arise under any of
the following conditions:
a. When a business is newly started.
b. When the existing business unit has outgrown its original facilities and expansion is
not possible; hence a new location has to be found.
c. When the volume of business or the extent of market necessitates th establishment
of branches.
d. When the lease expires and the landlord does not renew the lease.
e. Other social or economic reasons.
The importance of facility location is gaining much attention in today’s day and age as
companies are rapidly realising the importance and advantages of a successful facility
location as well as the disadvantages involved in the selection of an unsuccessful
facility location. The main focus of logistics is to reduce costs, improve efficiency as
well as customer service. Successful facility location decisions may lead to drastic
cost reductions as well as an improvement in the customer service levels. An
unsuccessful facility location decision may lead to inefficient operations and
additional costs which drastically affects the competency and effectiveness of the
overall operation. Logistics managers are critically evaluating the performance of
current facility locations.
Factors Affecting the Plant Location:
Many factors are considered while selecting a site. According to their importance
these are classified as primary factors & secondary factors.
Primary factors:
 Raw material supply: Production process will continue properly when
adequate supply of raw material is there. Raw material cost is a part of
total production cost. Inadequate supply of raw material will result in the
reduction in production. It will increase downtime & hence reduce
efficiency of industry. Due to this inadequacy, profit maximization may
 not be obtained. The time to transport & cost of transportation is also
important. Hence, industries are situated where raw material is available
easily.
 Nearness to market: This factor will produce the product to customer in
short time period and hence it will be less damage to the product. It also
reduces transportation cost. Also it will help the supplier to know the
requirement of customers.
 Transportation Facility: While selecting a site one thing has to be
considered that is transportation of any raw material, semi- finished &
finished goods should be as less as possible. By this factor material will be
transported less, which will affect the material quality, cost of
transportation, time to transport etc. Hence for all above reasons producer
has to select cheap & speedy transportation with various sources like road,
airways, railways, waterways etc.
 Labor Supply: Labor is most effective part of the industry, who produces
the product. The producer has to choose the site in such a way that labor
should present in adequate quantity with low cost and labor would be
skilled or unskilled. If labors are not present in sufficient numbers it will
increase downtime of production and decrease plant efficiency.
 Power Supply: Electrical, diesel, automatic etc. energies are required to
produce the product and also required for transportation. For continuous
production process regular and sufficient supply is necessary. Many
companies follow the industrial area because of availability of regular &
sufficient power supply.
 Supply of Capital: Capital is required for the industries for production,
day to day working, expansion, marketing etc. Large scale production
require large amount of capital which may be raised by shares, debentures
etc.
Secondary factors:
 Natural factors: Factors like land, water, climate etc. are very important
for industries.
  Government Policy: in particular area new plant can not be started due to
some rules and regulations made by government. Also, there are some
subsidies and other facilities to support small scale industries to grow up.
 Availability: Availability of housing, hospitality, entertainment, education
facilities also helps in deciding plant location.
 Miscellaneous factors:
           1. Sufficient water supply
           2. Danger of attack during war
           3. Personal factors
           4. Environmental & ecological factors
           5. Availability of safety facilities like fire- fighting, police etc.

Location Planning Methods

Various models are available which help to identify the ideal location. Some of the
popular models are:

1.Factor rating method

2.Weighted factor rating method
3.Load-distance method
4.Centre of gravity method
5.Break even analysis

Factor Rating Method for Location Planning

1-Factor Rating Method

The process of selecting a new facility location involves a series of following steps:
1.Identify the important location factors.
2.Rate each factor according to its relative importance, i.e., higher the ratings is
indicative of prominent factor.
3.Assign each location according to the merits of the location for each factor.
4.Calculate the rating for each location by multiplying factor assigned to each
location with basic factors considered.
 5.Find the sum of product calculated for each factor and select best location
having highest total score.
2-Weighted Factor Rating Method
In this method to merge quantitative and qualitative factors, factors are assigned
weights based on relative importance and weightage score for each site using a
preference matrix is calculated. The site with the highest weighted score is selected as
the best choice.
3-Load-distance Method
The load-distance method is a mathematical model used to evaluate locations based on
proximity factors. The objective is to select a location that minimizes the total
weighted loads moving into and out of the facility. The distance between two points is
expressed by assigning the points to grid coordinates on a map. An alternative
approach is to use time rather than distance.
4-Centre of Gravity
Centre of gravity is based primarily on cost considerations. This method can be used
to assist managers in balancing cost and service objectives. The centre of gravity
method takes into account the locations of plants and markets, the volume of goods
moved, and transportation costs in arriving at the best location for a single
intermediate warehouse.
The centre of gravity is defined to be the location that minimizes the weighted
distance between the warehouse and its supply and distribution points, where the
distance is weighted by the number of tones supplied or consumed. The first step in
this procedure is to place the locations on a coordinate system. The origin of the
coordinate system and scale used are arbitrary, just as long as the relative distances are
correctly represented. This can be easily done by placing a grid over an ordinary map. 

5-Break Even Analysis

Break even analysis implies that at some point in the operations, total revenue equals
total cost. Break even analysis is concerned with finding the point at which revenues
and costs agree exactly. It is called ‘Break-even Point’. The Fig. 2.3 portrays the
Break Even Chart: Break even point is the volume of output at which neither a profit
is made nor a loss is incurred.
Facility Layout:

Facility layout and design is an important component of a business's overall

operations, both in terms of maximizing the effectiveness of the production process
and meeting the needs of employees. 
Facility Layout Objective

A model facility layout should be able to provide an ideal relationship between raw
material, equipment, manpower and final product at minimal cost under safe and
comfortable environment. An efficient and effective facility layout can cover
following objectives:

 To provide optimum space to organize equipment and facilitate movement of

goods and to create safe and comfortable work environment.
 To promote order in production towards a single objective
 To reduce movement of workers, raw material and equipment
 To promote safety of plant as well as its workers
 To facilitate extension or change in the layout to accommodate new product
line or technology upgradation
 To increase production capacity of the organization

Advantages

1.In labor cost

 Increase in productivity with more units being produced per man hour.
 Reduction in the number of workers.
 Minimization of motions between operations.
2. In production control
 Increased production rate.
 Providing convenient and adequate storage points.
 Increased production rate.
  Improved ability of forecasting manufacturing time.
3. In supervision
 Lesser requirement of supervision.
 Reduction in time spent on inspection.
 Reduction in cost of inspection.
4. In other manufacturing costs
 Reduced consumption of power.
 Minimization of scrap and defectives.
 Better quality due to reduced handling.
 Reduced costs of maintenance.
 Improved utilization of materials.
5. To the worker
 Reduction in the number of handling.
 Reduced effort, stress and strain.
 Better safety and less chance of accidents.
 Improved productivity leading to higher wages.
 Increased morale and motivation.
 Improved health and welfare.
Four Main Types of Plant Layout

1. Product or Line Layout

2. Process or Functional Layout.

3. Fixed Position Layout.

4. Combination type of Layout.

(a) Product or Line layout

In an industrial set up, sometime, the machines and equipments are arranged in one
line depending upon the sequence of operations required for the product. The raw
materials and semi-finished materials move from one workstation to another
sequentially without any backtracking or deviation.
 Under this, machines are grouped in one sequence. Therefore materials are fed into
the first machine and finished goods travel automatically from machine to machine,
the output of one machine becoming input of the next, e.g. in a paper mill, bamboos
are fed into the machine at one end and paper comes out at the other end.
The raw material moves very fast from one workstation to other stations with a
minimum work in progress storage and material handling. The grouping of machines
is done on following general principles.
1.  All the machine tools or other items of equipments must be placed at the point
demanded by the sequence of operations
2.  There should no points where one line crossed another line.
3.  Materials may be fed where they are required for assembly but not necessarily at
one point.
4.  All the operations including assembly, testing packing must be included in the line.
Advantages offered by Product Layout:
(i) Lowers total material handling cost.

(ii) There is less work in processes.

(iii) Better utilization of men and machines,

(iv) Less floor area is occupied by material in transit and for temporary storages.

(v) Greater simplicity of production control.

(vi) Total production time is also minimized.

Limitations of Product Layout:

(i) No flexibility which is generally required is obtained in this layout.

(ii) The manufacturing cost increases with a fall in volume of production.

(iii) If one or two lines are running light, there is a considerable machine idleness.

(iv) A single machine break down may shut down the whole production line.
(v) Specialized and strict supervision is essential.

(b) Process or functional layout

In this type of layout machines of a similar type are arranged together at one place.
`For example, machines performing drilling operations are arranged in the drilling
department, machines performing casting operations be grouped in the casting
department. Therefore the machines are installed in the plants, according to various
processes in the factory layout.
Hence, such layouts typically have drilling department, milling department, welding
department, heating department and painting department etc. The process or
functional layout is followed from historical period. It evolved from the handicraft
method of production. The work has to be allocated to each department in such a way
that no machines are chosen to do as many different job as possible i.e. the emphasis
is on general purpose machine.
The work, which has to be done, is allocated to the machines according to loading
schedules with the object of ensuring that each machine is fully loaded.
Advantages of Process Layout:
(i) There will be less duplication of machines. Thus, total investment in equipment
purchase will be reduced.

(ii) It offers better and more efficient supervision through specialization at various
levels.

(iii) There is a greater flexibility in equipment and man power thus load distribution is
easily controlled.

(iv) Better utilization of equipment available is possible.

(v) Break down of equipment can be easily handled by transferring work to another
machine/work station.

(vi) There will be better control of complicated or precision processes, especially

where much inspection is required.
Limitations of Process Layout:
(i) There are long material flow lines and hence the expensive handling is required.

(ii) Total production cycle time is more owing to long distances and waiting at various
points.

(iii) Since more work is in queue and waiting for further operation hence bottle necks
occur.

(iv) Generally, more floor area is required.

(v) Since work does not flow through definite lines, counting and scheduling is more
tedious.

(vi) Specialization creates monotony and there will be difficult for the laid workers to
find job in other industries.

(c)Fixed position or location layout

Fixed position layout involves the movement of manpower and machines to the
product which remains stationary. The movement of men and machines is advisable as
the cost of moving them would be lesser. This type of layout is preferred where the
size of the job is bulky and heavy. Example of such type of layout is locomotives,
ships, boilers, generators, wagon building, aircraft manufacturing, etc.
Advantages Offered by Fixed Position Layout:
(i) Material movement is reduced

(ii) Capital investment is minimized.

(iii) The task is usually done by gang of operators, hence continuity of operations is
ensured

(iv) Production centers are independent of each other. Hence, effective planning and
loading can be made. Thus total production cost will be reduced.
(v) It offers greater flexibility and allows change in product design, product mix and
production volume.

Limitations of Fixed Position Layout:

(i) Highly skilled man power is required.

(ii) Movement of machines equipment’s to production centre may be time consuming.

(iii) Complicated fixtures may be required for positioning of jobs and tools. This may
increase the cost of production.

d. Combination Type of Layout:

Now a days in pure state any one form of layouts discussed above is rarely found.
Therefore, generally the layouts used in industries are the compromise of the above
mentioned layouts. Every layout has got certain advantages and limitations. Therefore,
industries would to like use any type of layout as such.

Flexibility is a very important factory, so layout should be such which can be molded
according to the requirements of industry, without much investment. If the good
features of all types of layouts are connected, a compromise solution can be obtained
which will be more economical and flexible.

Capacity Planning: Concepts,

Capacity Planning refers to the arrangement in which organizations or teams match

employees together with the needs of a project. Capacity is the optimum level of work
that can be done within an established period. Usually, it is measured in the quantity
of work that is carried out by employees. Also, planning equates to the scheduling
work hours against a specified amount of work.
Concept of Capacity Planning
o Design Capacity
It means the optimum level of output that can be gotten within a specified period.

o Effective Capacity
It means the optimum level of output, given the changes in product mix, equipment
maintenance, programming and operating issues, labor problems, etc. It usually is less
than the total design capacity.

o Actual Output
It is the level of output that is achieved actually. It cannot be more than the sufficient
capacity because of breakdowns in the machine, labor absenteeism, the inconsistent
supply of raw materials, abnormal delay in supply of equipment, power outage, etc.

Factors that impacts effective capacity:

Following are the factor that decides an effective capacity. They are;

• Facilities:
▪ In the facility labour, distance to market, transportation cost and energy are few
factors.
• Human factor:
▪ Training, skill, employee motivation, turnover ratio, experience and absence are
taken into deliberation.
• External factor:
▪ Features like quality and performance standards restrict the capacity.
• Policy factor:
▪ Policies like overtime, wages and shifts would have a greater impact.
• Operational factor:
▪ Quality inspection, purchasing, late delivery, acceptability of the purchased material.
• Supply chain factor:
▪ Suppliers, warehousing, distributors and transportation are other factors that
influences the capacity planning.
Determinants of Effective Capacity
1. Facilities
The design of production facilities is the most important determinant of effective
capacity. Design includes the size and also the provision for expansion of the
facilities. Design facilities should be such that the employees should feel comfortable
at their work place. Location factors such as distance from the market, supply of
labour, transport costs, energy sources are also important. Layout of the work
area determines how smoothly the work can be performed. Environmental factors
such as lighting, ventilation, etc., influence the effectiveness with which employees
can perform the assigned work.
2. Products or Services
Design of the company’s products or services exerts a significant influence on
capacity utilization. When more uniform is the output, greater can be the
standardization of materials and methods and greater can be the utilization of capacity.
For instance, a restaurant that offers a limited menu, can prepare and serve meals at a
faster rate. Product mix should also be considered because different products have
different rates of output.

3. Process
Quantity capacity of a process is the obvious determinant of effective capacity. But if
quantity of output does not meet the quality standards, the rate of output is reduced
due to the need for inspection and rework activities.

4. Human factors
Job design (tasks that comprise a job), nature of the job (variety of activities
involved), training and experience required to perform the job, employee
motivation, manager’s leadership style, rate of absenteeism and labour turnover are
the main human factors influencing the rate of output.
5. Operational Factors
Materials management, scheduling, quality assurance, maintenance policies and
equipment breakdowns are important determinants of effective capacity. Late delivery
and low acceptability of materials will reduce effective capacity. Inventory
problems are a major hurdle in a capacity utilization. Similarly, when the alternative
equipment have different capabilities there may be scheduling problems.
6. External Factors
Product standards (minimum quality and performance standards), pollution control
regulations, safety requirements and trade union attributes exercise tremendous
influence on effective capacity. Generally, the external factors act as constraints in
capacity utilization.

Capacity Planning Framework

Production Planning & Control (PPC):

Concepts:

Production planning and control is an important task of Production Manager. It has to

see that production process is properly decided in advance and it is carried out as per
the plan. Production is related to the conversion of raw materials into finished goods.
This conversion process involves a number of steps such as deciding what to produce,
how to produce, when to produce, etc. These decisions are a part, of production
planning. Merely deciding about the task is not sufficient.

The whole process should be carried out in a best possible way and at the lowest cost.
Production Manager will have to see that the things proceed as per the plans. This is a
control function and has to be carried as meticulously as planning. Both planning and
control of production are necessary to produce better quality goods at reasonable
prices and in a most systematic manner.

Objectives of Production Planning & Control

The objectives of PPC are as follows:

1. to ensure safe and economical production process

2. to effectively utilize plant to maximize productivity

3. to maximize efficiency by proper coordination in production process

4. to ensure proper delivery of goods
5. to place the right man for the right job, at right time for right wages.
6. to minimize labor turnover
7. to reduce the waiting time

Production Planning and Control: (10 Functions)

Some of the important functions of production planning and control are listed below:
1. Materials Function:
Raw materials, finished parts and bought out components should be made available in
required quantities and at required time to ensure the correct start and end for each
operation resulting in uninterrupted production. The function includes the
specification of materials (quality & quantity) delivery dates, variety reduction
(standardisation) procurement and make or buy decisions.

2. Machines and Equipment:

This function is related with the detailed analysis of available production facilities,
equipment down time, maintenance policy procedure and schedules. Concerned with
economy of jigs and fixtures, equipment availability. Thus the duties include the
analysis of facilities and making their availability with minimum down time because
of breakdowns.

3. Methods:
This function is concerned with the analysis of alternatives and selection of the best
method with due consideration to constraints imposed. Developing specifications for
processes is an important aspect of PPC and determination of sequence of Operations.

4. Process Planning (Routing):

It is concerned with selection of path or route which the raw should follow to get
transformed in to finished product.

5. Estimating:
Once the overall method and sequence of operations is fixed and process sheet for
each operation is available, then the operations times are estimated. This function is
carried out using extensive analysis of operations along with methods and routing and
standard times for operation are established using work measurement techniques.

6. Loading and Scheduling:

Scheduling is concerned with preparation of machine loads and fixation of Starting
and completion dates for each of the operations. Machines have to be loaded
according to their capability of performing the given task and according to their
capacity.

Thus, the duties include:

(a) Loading the machines as per their capability and capacity.

(b) Determining the start and completion times for each operation.

(c) To Co-ordinate with sales department regarding delivery schedules.

7. Dispatching:
This is the execution phase of planning. It is the process of setting production
activities in motion through release of orders and instructions. It authorises the start of
Production activities by releasing materials, components, tools, fixtures and
instruction sheets to the operator.

The activities involved are:

(a) To assign definite work to definite machines, work centres and men.

(b) To issue required materials from stores.

(c) To issue jigs, fixtures and make them available at correct point of use.

(d) Release necessary work orders, time tickets etc. to authorise timely start of
operations.

(e) To record start and finish time of each job on each machine or by each man.
8. Expediting:
This is the control tool that keeps a close observation on the progress of the work. It is
a logical step after dispatching which is called “follow-up” or “Progress”. It co-
ordinates extensively to execute the production plan. Progressing function can be
divided in to three parts, i.e. follow up of materials, follow up of work in process and
follow up of assembly.

The duties include:

1. Identification of bottlenecks and delays and interruptions because of which the
production schedule may be disrupted.

2. To devise action plans (remedies) for correct the errors.

3 To see that production rate is in line with schedule.

9. Inspection:
It is a measure control tool. Though the aspects of quality control are the separate
function, this is of very much important to PPC both for the execution of the current
plans and in scope for future planning. This forms the basis for knowing the
limitations with respects to methods, processes etc. which is very much useful for
evaluation phase.

10. Evaluation:
This stage though neglected is a crucial to the improvement of productive efficiency.
A thorough analysis of all the factors influencing the production planning and control
helps to identify the weak spots and the corrective action with respect to preplanning
and planning will be effected by a feed back. The success of this step depends on the
communication, Data and information gathering and analysis.

Work Study: Productivity

Definition of Work Study:

“Work study is a generic term for those techniques, particularly method study and
work measurement, which are used in all its context and which lead systematically to
the investigation of all the factors, which effect the efficiency and economy of the
situation being reviewed in order to effect improvement.
Productivity:
Productivity is the quantitative relation between what we produce and we use as a
resource to produce them, i.e., arithmetic ratio of amount produced (output) to the
amount of resources (input). Productivity can be expressed as: Productivity = Output
Input Productivity refers to the efficiency of the production system. It is the concept
that guides the management of production system. It is an indicator to how well the
factors of production (land, capital, labour and energy) are utilised. European
Productivity Agency (EPA) has defined productivity as, “Productivity is an attitude of
mind. It is the mentality of progress, of the constant improvements of that which
exists. It is the certainty of being able to do better today than yesterday and
continuously. It is the constant adaptation of economic and social life to changing
conditions. It is the continual effort to apply new techniques and methods. It is the
faith in progress.” A major problem with productivity is that it means many things to
many people. Economists determine it from Gross National Product (GNP), managers
view it as cost cutting and speed up, engineers think of it in terms of more output per
hour. But generally accepted meaning is that it is the relationship between goods and
services produced and the resources employed in their production

Work Study and Productivity:

As we know that, productivity is nothing but the reduction in wastage of resources.

The resources may be men, machines, material, power, space, time etc.

We have also seen from the definition of work study, that it reduces wastage of time,
effort, and increases the efficiency of man and machine. Thus the work study
techniques lead to increase the productivity.

According to V.K.R. Menon, productivity implies development of an attitude of mind

and constant urge to find better, cheaper, easier, quicker and safer means of doing a
job, manufacturing a product and providing service.
But we see that most of these objects can be achieved by different activities of work
study. To improve the economic position of our country in comparison to other
countries, we must improve our productivity and performance.

In recent years, there had been regular pay increases, but we have forgotten that
without improving the productivity, prices will be sky rocketing and we will lose
competition in the world market. To compensate for wage increase, we must increase
the productivity.

To fight against inflation, we must increase the productivity. The battle fields of this
fight are every place where resources (men, material, equipment, money, time, efforts
etc.) are involved.

The factory and the agriculture are most important places where we must emphasize
for productivity improvement. Other places like offices, hospitals, teaching
institutions etc. also need productivity improvement, if the society and the country is
to move forward.

Thus our aim must be to make people more productivity conscious, if we want to
improve their standard of living. Productivity holds the key to the prosperity of the
individual, a company and a nation.

Increase in productivity results in:

(1) Increase in production and hence higher profits.

(2) Products produced will be cheaper.

(3) Higher wages and bonus can be allowed to workers because of large profits.

(4) Improvement in living standard of workers.

(5) Brings prosperity in the country.

“Work Study is an organised continued efforts to improve productivity and quality,
and to reduce costs within an organisation”. For this purpose a work study engineer
must continue to lead the way in “Resources Utilisation”.

WORK STUDY
“Work study is a generic term for those techniques, method study and work
measurement which are used in the examination of human work in all its contexts.
And which lead systematically to the investigation of all the factors which affect the
efficiency and economy of the situation being reviewed, in order to effect
improvement.”

Work study is a means of enhancing the production efficiency (productivity) of the

firm by elimination of waste and unnecessary operations. It is a technique to identify
non-value adding operations by investigation of all the factors affecting the job. It is
the only accurate and systematic procedure oriented technique to establish time
standards. It is going to contribute to the profit as the savings will start immediately
and continue throughout the life of the product. Method study and work measurement
is part of work study. Part of method study is motion study, work measurement is also
called by the name ‘Time study’.
METHOD STUDY
Method study enables the industrial engineer to subject each operation to systematic
analysis. The main purpose of method study is to eliminate the unnecessary operations
and to achieve the best method of performing the operation. Method study is also
called methods engineering or work design. Method engineering is used to describe
collection of analysis techniques which focus on improving the effectiveness of men
and machines. According to British Standards Institution (BS 3138): “Method study is
the systematic recording and critical examination or existing and proposed ways or
doing work as a means or developing and applying easier and more effective methods
and reducing cost.” Fundamentally method study involves the breakdown of an
operation or procedure into its component elements and their systematic analysis. In
carrying out the method study, the right attitude of mind is important. The method
study man should have: 1. The desire and determination to produce results. 2. Ability
to achieve results. 3. An understanding of the human factors involved. Method study
scope lies in improving work methods through process and operation analysis, such
as: 1. Manufacturing operations and their sequence. 2. Workmen. 3. Materials, tools
and gauges. 4. Layout of physical facilities and work station design. 5. Movement of
men and material handling. 6. Work environment.
Objectives of Method Study
Method study is essentially concerned with finding better ways of doing things. It
adds value and increases the efficiency by eliminating unnecessary operations,
avoidable delays and other forms of waste. The improvement in efficiency is achieved
through: 1. Improved layout and design of workplace. 2. Improved and efficient work
procedures. 3. Effective utilisation of men, machines and materials. 4. Improved
design or specification of the final product. The objectives of method study techniques
are: 1. Present and analyse true facts concerning the situation. 2. To examine those
facts critically. 3. To develop the best answer possible under given circumstances
based on critical examination of facts.
WORK MEASUREMENT
Meaning and Definition of Work Measurement:
Work measurement is concerned with the determination of the amount of time
required to perform a unit of work. Work measurement is very important for
promoting productivity of an organization. It enables management to compare
alternate methods and also to do initial staffing. Work measurement provides basis for
proper planning.

Since it is concerned with the measurement of time it is also called ‘Time Study’. The
exact examination of time is very essential for correct pricing. To find the correct
manufacturing time for a product, time study is performed. To give competitive
quotations, estimation of accurate labour cost is very essential. It becomes a basis for
wage and salary administration and devising incentive schemes.

Work measurement has been defined by British Standard Institution as, “The

application of techniques designed to establish the time for a qualified worker to carry
out a specified job at a defined level of performance”. This time is called standard or
allowed time. Time study may also be defined as “the art of observing and recording
the time required to do each detailed element of an industrial operation”.

Work measurement is also called by the name ‘time study’. Work measurement is
absolutely essential for both the planning and control of operations. Without
measurement data, we cannot determine the capacity of facilities or it is not possible
to quote delivery dates or costs. We are not in a position to determine the rate of
production and also labour utilisation and efficiency. It may not be possible to
introduce incentive schemes and standard costs for budget control.