OPERATIONS & PRODUCTION MANAGEMENT

1. Introduction
1.1 Operations Management:
Meaning / Definition: Operations Management is a systematic approach to address all the
issues pertaining to the transformation process that converts some inputs into outputs that are
useful and could fetch revenue to the organization.
A manufacturing firm essentially engages in converting several inputs into products that are
useful for individuals and organizations. On the other hand, a service organization addresses
the requirements of its customers using a service delivery system and provides the required
services, both manufacturing and service organizations for operations systems. An operations
system is defined as one in which several activities are performed to transform a set of inputs
into a useful output using a transformation process. This inputs and outputs can be physical
things, such as, materials and / or, informational and experiential things, viewed in this
manner it can be said that both the manufacturing systems and service systems are operations
systems and the management of these two operations systems is called operation
management.
1.2 Different Aspects of Operations Management
1. For successful operations management focus should be on developing a set of tools and
techniques to analyses problems faced within an operations system.
2. The second aspect of operations management is to address the problem that an
organization faces. The problems include deciding how to re – route jobs issue when a
machine breaks down on a shop floor, or how to handle a surge in demand in a service
system, decisions such as, where to locate the plant, what capacity to build in the system and
what types of products and services need to be offended to the customers, operations
management provides alternative methodologies to address such wide ranging issues in an
organization.
3. Focus on the operations management discipline is to address the various aspects of design
in the transformation process as well as planning and control of operations.
4. Performance evaluation methods and systems should be developed so that operations
management can ensure that through careful planning and control, the organization is able to
keep cost to the minimum and obtain revenue in excess of costs.

1.3 Differences between services and manufacturing:

1. First two ends of the spectrum: Although services are often classified separately from
manufacturing in a macro economic sense, from the perspective of operations management,
the separation is artificial. From the operations management perspective, the notion of a pure
product and pure service is just two ends of the spectrum in reality, a vast majority of
operations share a continuum of services and products. Most of the principles and tools and
techniques of operations management apply to both the sectors.
Example: Services such as, management consulting, health care education have dominant
service attributes. They form the end of the spectrum. Similarly manufacturing and supply of
machine tools gadgets and automobiles have dominant product attributes and they form the
other end of the spectrum. Several others share both service & product attributes. We can
take the care of automobiles and restaurant where cars and food items are the products and
experiential component of using the car and serving the foods are service attributes.
1.4 Differences between Services & Manufacturing:
Followings are the differences between services and manufacturing:
Point of Difference
a. Intangibility :
b. Heterogeneity :
c. Simultaneous production
& Consumption :
d. Perishability:
Services
Intangible.
(Services are performing and
action cannot be touched or
felt)
High degree of heterogeneity.
(Experiential component is
dominant in services and as
such services may not be
alike.)
Production of services &
consumption many be
simultaneous.
Services have the
characteristics of Perishability.
Services cannot be inventoried
or stored for use at some other
point of time
Perishability is applicable to a
pure service.
Manufacturing
Tangible.
(Manufacturing product
oriented concept )
High degree of homogeneity.
(Manufacturing processes are
more or less alike.)
Production of goods at some
point of time and consumption
is at some other point of time.
Manufacturing have the
characteristics of non
Perishability or Inventories for
use at some other point of time.
Now Perishability or durability
is applicable to pure product.

1.5 Characteristics / features of services:

1. Intangibility
2. Heterogeneity
3. Simultaneous production & consumption
4. Perish ability

1.6 Function of Operations Management:

Important functions of operations management are listed / stated below:
a. Functions pertaining to design of an operations system:
1. Product design and development
2. Process design
3. Quality Management
4. Location and layout of facilities
5. Capacity planning
b. Functions pertaining and control of operations
6. Forecasting.
7. Production planning and control
8. Supply Chain Management
9. Maintenance Management
10. Continuous improvement of operations.
1.7 Differences & similarities between Manufacturing organizations and
service organizations:
Differences:
Manufacturing Organizations Service Organization
1. Physical, durable product. 1. Intangible, perishable product
2. Output can be inventoried. 2. Output cannot be inventoried.
3. Low customer contact. 3. High customer contact.
4. Long response time. 4. Short response time.
5. Regional national, international markets 5. Local markets
6. Large facilities 6. Small facilities.
7. Capital intensive 7. Labor intensive
8. Quality easily measured. 8. Quality not easily measured.

Similarities:
1. Both are concerned about quality, productivity and timely response to its customers.
2. Both must make choices about capacity, location, and layout.
3. Both have supplies to deal with.
4. Both have to plan operations schedules & resources.
5. Both must balance capacity with demand.
6. Both have to make an estimate of demand.

1.8 Operations Management

Some definitions of operations management given by renowned authors are stated below:
1.” Operations Management is the management of system or processes that create goods and /
or, provide services “William J. Stevenson
2.” Operations Management is the direction and control of the processes that transform inputs
into products and services “Lee J. Krajeoski and Larry P. Ritrman
3. " Operation Management (OM) is defined as the design operation and improvement of the
systems that create and deliver other firms primary products and services” chase Iacobs
Acquilano

Operation: (Dictionary meanings)

1. Medical - doctor’s performance: Eye operation, heart operation.
2. Organized Activity that involves several people doing different things.
3. Police / Military Activity: police or military operation.
4. A business or company involving many parts. The activity or work done in an area of
business or industry.

1.9 Production Management

Definitions:
Generally, management pertaining to production of goods in a manufacturing industry by
manufacturing processes is called Production Management.
Some definitions of renowned authors are given below:
1. " Production Management is the process of effectively planning and regulating the
operations of that part of the enterprise which is responsible for the actual transformation of
raw materials into finished product ". E. F. L Brech.
2. " Production management deals with decision making relating to production process so
that the resulting goods or service is produced according to specifications, in the amounts and
by the schedule demanded at minimum cost.” Elwood S. Buffa.
3. " production management is the process of designing, manning, operating, servicing and
centralizing the activities of a manufacturing organization responsible for actual
transformation of material inputs into marketable finished goods." K. K. Ahuja
4. According to Keith Lockyer, “Production management is the interdependent functions of
five ' Ps ', which are product, plant, process, programme & people.
1.10 Functions of Production Management:
A. Preparatory Functions:
1. Making product design
2. Production planning
3. Forecasting
4. Work study
5. Method analysis
6. Work measurement
7. Plant layout
8. Factory location
B. Operating Functions:
1. Production control
2. Inventory control
3. Quality control
4. Product research & development
5. Making production budget
 OPERATIONS STRATEGY
2.1 Meaning / definition:
Operations strategy is a process by which key operations decisions are made that are
consistent with the overall strategic objectives of the firm. It is the process of making
appropriate decisions in the operations functions on the basis of the inputs from the overall
corporate strategy. It links the overall strategic intents and the corporate strategy to specific
aspects of the operations systems. In particular, operation strategy is a process by which key
operations decisions that are consistent with the overall strategic objective of the firm are
made. These decisions include the extent of capacity to be built into the system, the type of
process and manufacturing technology to be used, the nature of products to be manufactured
and the type of supply chain to configure.
2.2 Operations Strategy Formulation Process:
The process of formulating an appropriate operations strategy in any organization involves a
segmental and structured set of activities, these are mainly three steps in the process.
The main steps in the strategy formulation process are as follows:
1. Identity strategic options for sustaining competitive advantage.
2. Diverse overall corporate strategy.
3. Develop an appropriate operations strategy.
A detailed operations strategy formulation process is shown below in a diagram:

Competitive dynamics Order Winners

at the market place Order Qualifiers

Strategic options
for sustaining
competitive Generic competitive
advantage priorities, quality,
cost, delivery,
flexibility

Firm level strength dynamics at the Corporate Strategy

Competitive market place: The strategy making exercise begins
and weaknesses
with scanning the market place and understanding the dynamics of the market place.
The market dynamics informs and organization of the relevant issues to be considered
for the strategy formulation process. It provides useful information about the
competitors, the nature of the offerings that they make to the customers, the
Strategic decision for
customers’ expectations etc. Operations Measures for operational
operations
 Order systems
Qualifiers /Order QualifyingStrategy
Attributes: Order qualifiersexcellence
or order qualifying
attributes are the set of attributes that customers expect in the product or service they
consider for buying. The absence of any of these attributes with result in the customer
removing the product or service from consideration for purchase.
 Order Winners /Order Winning Attributes: Order winners or order winning
attributes are other attributes that they have the potential to sufficiently motivate the
customers to buy the product.
  Competitive Priorities: Competitive priorities to the customers may differ from time
to time and customers to customers. Priorities may be quality, costs, wide variety,
price, ease of use, delivery commitments, and technological superiority of products or
service, critical post sales support or service etc.
 Measures for operational excellence: Operational excellence measures provide the
critical linkage between order winning and order qualifying attributes identified
through the strategic planning exercise and the choices made in the operations. For
generic options are generally formed to be useful for any operation strategy exercise.
These are quality, cost, delivery and flexibility.

2.3 Strategic Options for Operation:

Options available in operations management for strategic decision.
For strategic decisions the organization may have the following options in operation
management ie with respect to the design and operational control of the operations system of
the organization:
1. Product Portfolio
2. Process
3. Technology
4. Capacity
5. Break Even Analysis
6. Supply Chain Issues

1. Product Portfolio:
One of the most important strategic choices or options that an organization can make is with
respect to its product portfolio. Product portfolio pertains to decisions on what are the
products that the organization wants to produce, the number of variations in each product line
and the extent of customization that it can offer to its customers.
2. Process:
Process design provides another option to translate strategic objective to operations by the
appropriate choice of processes. These types of flow happen on account of process choices:
continuous streamlined flow, intermittent or batch flow and jumbled flow.
3. Technology:
Organizations making a strategic choice /option to operate in the manufacture of mid-volume,
mid variety products can utilize new technology such as, flexible manufacturing system and
computer integrated manufacturing to improved productivity, manufacturing technology can
provide unique advantage to firms in providing better products and services to customers.
4. Capacity:
Capacity is defined as the maximum number of units of goods that can be produced per unit
time in case of manufacturing system and the maximum number of service offerings that can
be made per unit time in the case of a service system. Capacity decisions in operations
directly and significantly influence. The cost of goods and services offered in three ways –
1. Accrued Cost advantage due to economics of scale.
2. Cost advantage from accounting principles pertaining to marginal cost and contribution.
3. Benefits arising from large capacity investment.
5. Break Even Analysis:
Break Even point is the point where total cost is just equal to total sales or revenue. In other
words, we can say that the point where to total cost line intersects the total sales line or, the
total sales line intersects the total cost line in a Break Even chart is called Break Even Point.
At BEP, the business organizations neither earn any profit, nor incur or sustain any loss. It is
the 'no profit ' 'no loss 'position of the organization. So, in order to earn profit sales must be
greater than total cost of sale in case of manufacturing system and total cost of offerings in
case of service system. At Break Even Point, total contribution margin is able to cover total
fixed cost invested in the system. BEP can be expressed in terms of units or /and in terms of
tk on in any currency.
TFC
BEP (Unit) = Unit contribution Margin
TFC ×Unit selling price
BEP (Unit) = Unit contribution Margin
OR,
TFC
BEP (Unit) = C . M Ratio
BEP can be presented graphically which is known Break even chart.
Example :
Sales 5000 units @tk 20 per unit tk 100,000
Variable cost @tk 10 per unit tk 50,000
Total fixed cost (TFC) tk 40,000

Solution:
TFC UC=S-VC
BEP (Unit) = Unit contribution Margin
=20-10
40,000
= 10 = tk 10
= 4,000 units.

TFC ×Unit selling price

BEP (Unit) = Unit contribution Margin
40,000 ×20
= 10
= tk 80,000

Or,
TFC C/M Ratio
BEP (Unit) = C . M Ratio C.M
40,000 = Sale × 100
¿
50 % 10
= 20 ×100
=tk 80,000
=50%

Graphically Presentation (Break even chart):

 Sales (TK) / (Unit)
Fig. Break Even Chart
Cost volume profit analysis suggests tk organization for production for goods and services up
to the last limit of the relevant range.

6. Supply Chain Issues:

Supply chain refers to the network of the business organizations supplying components and
raw materials to the entities as well as those distributing the finished goods of an organization
to the customers through alternative channels. An efficient supply chain is designed with the
main objective of pursuing efficiency goals with respect to supply chain operations.
 PRODUCT DESIGN AND DEVELOPMENT
3.1 Meaning and definition:
Product design and development process consists of a structured and orderly set of activities.
These activities repeat at periodic intervals when the firm feels the need for bringing new
products. These activities could be considered to be going through an endless cycle.
Product development process is the broad set of tools, techniques and concepts that provide a
firm with a capability to provide distinctiveness in the offerings by rolling out new products
and services faster and at a lower cost.
An organization armed with a good product development process will be in a better position
to bring new products and services to the market ahead of the competition.
3.2 Stages of product design and development process:
Broadly product development process consists of four (4) stages.
These are follows:
1) Concept generation
2) Design
3) Development
4) Production
A typical product design and development process is shown below in a diagram;

1. Concept Generations 2. Design

Idea No
Feasibility study Design
Generations Preliminary
Yes Ok?
Product feasibility?
Design
Process Cost yes
No planning planning

4) Production Prototype Prototype

yese Ok? developing
Final design & manufacturing s & testing
specifications
Commercial production
No
3) Development
Fig: Typical Product Design and Development Process

1. Concept generation:
The first stage in a product development cycle is concept generation. New products
and services are the outcome of the need to close the gap that exists in the market with
respect to the consumer need. This activity requires good innovation skills to develop
unique products and services. Feasibility study should be conducted such as
technology feasibility, marketing feasibility, cost feasibility, feasibility of customer’s
acceptance etc. feasibility is not strictly evaluated at this stage in a detailed fashion,
and roller a first cut expert judgment may be considered valuable to fix some of the
assumption and number behind the concept.
2. Design:
 The second step/ stage of product development is to draw the design of the product.
During this stage, details specifications are first drawn about the product which is
known as preliminary design. Design may be about shapes, sizes, weights, materials
surface finishing etc. Process planning activities provides the details of the product
bring designed. Product specifications and the process planning decision are required
for cost estimation of the proposed design of the process.
3. Development:
The third step/ stage of product development process is the physical development of
the product. During this stage, the details arrive at on the drawing board are translated
into reality. Usually, a prototype is built for extensive testing and fire- turning of
design specification. Moreover, detailed manufacturing specifications, specific
method of manufacture, assembly and testing are established during this stage. A few
pieces of product are manufacturing for testing in this phase.
4. Production:
The last stage of product development process pertains to the transfer of known how
to Production personnel and establishing the system for volume production. The
efficiency and effectiveness of the manufacturing process, dedicated equipment and
assured source of supply are established and addressed in a detailed fashion in this last
stage of product development process.
 Process Design
or
Design of Process
4.1 Meaning / Definition:
Process design essentially means the various choice that are made with respect
of the flow of ports in a manufacturing system . process design is a planning
process for each and every component manufactured that determines the
member of steps of involved in manufacturing, the number and type of steps
used and the time spent in each of these steps. It is more commonly refused to
as process. planning which is technical and is mainly a production engineering
activity.
At a higher level the design of process indicates how the manufacturing
resources are organized in the operation system so that flow pattern are
optimized and appropriate operation management tools can be used of
effectively control the overall operation.
4.2 Determinants of process characteristics in operations
it is important to an operation manager to know what characteristic influence
the choice of attractive process. Generally three important aspects have a
significant influence in the process which are stated below
1. volume
2. variety
3. Flow
1. volume:
Volume indicates average quantity of the products produced in a manufacturing
system. Volume may differs from one manufacturing industry to one have
depending on size of the product nature of the product durability of the product
used of consumption of product. Some industry may have the production value
of first one, of its may have high volume of production necessiting continuous
production. In between these two extremes these may have made volume
manufacture who may cater to their customs with several alternatives version
of products when the volume of production is very high of the firm. Is engaged
in the manufacture of few varieties of product
2. Variety:
Variety refers to the member of alternative products and variants of each
product that are produced in a manufacturing system. A company may other
many varieties of a certain type of product Increase in the variety of product
offering is quickly to introduce variety of process in the system. Alternative
production resource materiel skills of worker, number of stage of production.
may make the process complex and may call for better operation management
practices.
3. Flow:
Irrespective of the nature of activities involved all manufacturing systems
require infect maintains with which the process began , the materials undergo a
conversion process in order to be transformed use to a useful product for
customers. flow indicates the nature instantly of this phenomenon and provides
an understanding of how the components and materials in an operation
system .get transformed from the raw material stage. to the famished goods
stage. Knowledge of flow products vital clean to the operation manages about
production planning and control issues of the production process. It also
provides useful information about the complicities of operation management in
and operating system.
Three types of flow can be indentified continuous inter mitten and jumbled.
4.3:Relationship between volume and verity in operations system:
In general volume and Varity seem to have an inverse relationship. which the
volume of production is very high. it is highly likely that firm is engage in the
manufacture of new varieties of production. on the contrary if the firm caters
wide ranging set of products and service then the production volume of each of
these
 variation is likely to be very. the relationship between volume and variety in
operation systems is show in the forming diagram.
High High

Volume Variety

Project
Mass
Organization
Production
Walton
Petro Chemists
Sony
Automobiles Mid Volume
Mid Variety
Motor Manufactiong
Pharmaceutical

4.3: Types of flows in operating system’s :

Process of characteristics are largely operating by flow of product in an
operating system. Generally three types of flows are identified in operating
system which are:
1) Continuous flow
2) Intermittent flow
3) gambled flow
1. Continuous flow system:
A continuous flow system is a streamlined flow of products in the operating
system. In continuous flow system the conversion product. begin rift input of
row material at one process end. It progress through the system in an orderly
fashion to finally become finished goods at the final stage .the production
process in sequential and the required resource are organized in stage.
In process industries like chemical industries paper manufacturing industries
continuous flow system is in operation.
A continuous flow system in paper
 Manufacturing process is shown below:

Logs and Chips of wood Crushing of logs & chips Processing of the wood
Stored
Preparatory

Pulp Making
Drying the wood pulp Refining the wood pulp Cleaning and bleaching

Paper Making

Continuous Flow System in Paper Manufacturing process

Stretching paper rolling Cuffing Final Packing

2. Intermittent flow system:

Intermittent flow system are characterized by mid volume , mid variety
products or serious diorite and process industries have alternative ways by
which they can address the flow completive arising one of a mid volume mid
variety serious. Intermittent flow system can be followed in the production of
product in bathes.
In one batch one set of variations in manufactured and in the next batch one
her set of variations is manufactured . In between two batches the necessary set
up and changeover of resource are made to facilitate smooth production and
maximum productivity . such and arrangement results in facilitation of
intermittent flow system.
Process during for intermittent flows in discrete manufacturing system in
shows below in a diagram.

Pre- Manufacturing activities

3. Jumbled Flow system.
The third category of flow is jumbled flow which occurs on account of
nonstandard and complex flow pattern characteristic of cretin manufacturing
system. This flow system is complex non standard and because these are image
process designer for each and every customer order. more over customer
orders are typically for one off items and organization. cannot benefit form any
batching and respective manufacturing practices as continuous flow and
intermittent flow system.
In reality two types of manufacturing system have jumbled flow project.
organization and customized manufacturing system:
Project organization: Constriction of bridling (design, form diction,
supserstonctare, elechical system, air conditioning). How is junbled.
Customised Manffcion – Variety of sheet metel fabricatoss tool room
operfrtors, prontiong & Aeblis hing. Since each contomer noles demands uniue
process system, the flow is gambled.
 Jumble: To mix things together in a confused way.
 customize: To make or change things to unit the needs of the customer
owners.
 INVENTORY MANAGEMENT AND CONTROL
4.1 Meaning & Definition:
An Inventory is a stock or store of production a manufacturing company manufactures for
sale and the components that make up the products. The various Forms in which the
inventories exist in a manufacturing company are raw materials, work-in-process, finished
goods, as well as spare parts for machines, tools and other supplies. Departmental stores carry
clothing, furniture stationery, appliances, gift items, sporting goods, food items, fruits and
many more hospital may stock drugs, surgical supplies, life monitoring equipment’s etc.
4.2 Functions of Inventory Management:
Inventory Management serves a number of functions. Among the most important are the
following:
 To meet anticipated customer demand.
 To smooth production requirement.
 To decouple operations.
 To protect against stock outs.
 To take advantage of order cycle.
 To hedge against price increases.
 To permit operations.
 To take advantage of quantity discounts.
 To contribute to customer satisfaction.
 To provide satisfactory customer service by supplying inventories as per requirement.
 To avoid under and overstocking.
 To mammies the cost of Inventory.

4.3 Motives for holding Inventories:

There are three motives for holding inventories:
1. Transactions motive: It emphasizes the need to maintain inventories to facilitate
smooth production & sales operation.
2. Precautionary motive: It necessitates holding of inventories to guard against the risk
of unpredictable changes in demand and supply forces and others factors.
3. Speculative motive: It influences the decisions to increase or decrease inventory
levels to take advantage of price factors.
4.4 Motives for manufacturing stock of Raw materials, work-in progress
and Finished good:
1. Stock of Row materials: A company should maintain adequate stock of Martials for
a continuous supply to the factory for on un-inter reputed production. It may not be
possible to purchase raw materials whenever it is needed. Moreover the Company
may take the advantages of quantity discount anticipated price rice.
2. Work-in progress: Work in progress builds up because of the production cycle. Till
production cycle completes stock of work in process has to be maintained.
3. Finished goods: Stock of finished goods has to be held become production and sales
are not instomtasseous .A firm cannot produce immediately When the goods are
demanded by customer. So stock of finished goods has to be maintained to maintain
the supply flow on a regular basis.

4.5 Objectives of Inventory Management:

 The main objective of Inventory management is to face the problems of meeting two
conflicting needs which are;
a) To maintain a large size of inventory for efficient and smooth production and
sale operations.
b) To maintain a minimum investment in inventory to maximize profitability.

Both excessive and inadequate inventories are the two danger pointswhich are not
disable.
 Two avoid a situation of over-investment and under investment in inventories.
 To ensure control of investment in inventories and to keep it at an optimum level.
 To ensure continuous supply of raw materials to facilitate uninterrupted production.
 To maintain sufficient stock of raw materials in periods of short supply and anticipate
price changes.
 To maintain sufficient finished gods inventory for smooth sales operation and
efficient customer service.
 To minimize the carrying cost and time.

4.6 Inventory Management Technique:

For effective, efficient and successful inventory management of an organization. The
following techniques are generally used and maintained:
1) Economic Order Quantity (EOQ)
2) Ordering costs
3) Carrying cost
4) Economic Production Size (EPS)
Or,
Economic Lot Size (ELS)
Economic Production Quantity (EPQ)
Economic Production Run (EPR)
5) Maximum Level or Maximum stock
6) Minimum Level or Minimum stock
7) Average Level or Average stock
8) Re-order Level or Re-order point
 9) Safety stock
10) ABC Plan

Economic Order Quantity (EOQ):

Economic Order Quantity is that quantity or inventory level at which total cost will be the
minimum. Tow type of costs- Ordering Costs and Carrying Costs are involved with
Economic Order Quantity. Economic Order Quantity is that quantity where the total ordering
cost is equal to total carrying cost and the total of both ordering cost and carrying cost is the
minimum.
The optimum inventory size is commonly referred to as Economic Order Quantity (EOQ).
Determination of Economic Order Quantity (EOQ):
Economic Order Quantity can be determined in the following 3 (three) methods:
1) Arithmetic Method
2) Tabular Method
3) Graphical Method
1) Arithmetic Method:
2 NO
EOQ=
√
Where,
C

EOQ = Economic Order Quantity

N = Annual Requirements is units or quantity
O= Ordering Cost per order
C= Annually Carrying Cost per unit
Illustration-1: From the following particulars of problems.
Problem-1:
XYZ Ltd, Annual requirements 1,600 units, Ordering cost per order Tk.500, Carrying cost
per unit Tk.10. Calculate the EOQ.
Solution:
2 NO
EOQ=
√ C
2 ×1,600 ×500
Where,
EOQ = Economic Order Quantity
¿
√ 10
¿ √ 1,60,000
N= Annual Requirements is units
(No of Annual requirement = 1,600)
O= Ordering Cost per order = Tk.500
¿ 400 units C = Annually Carrying Cost per unit = Tk.10
Problem-2:
Following information is available from the records of Star Co.Find out EOQ.
Monthly material required 500 units, cost of placing and receiving one order Tk.120 cost of
material per unit Tk.10. Carrying cost is 10% of inventory value.
Solution:
2 NO
EOQ=
√ C
2 ×6,00 o × 120
Where,
EOQ = Economic Order Quantity
¿
√ 1
¿ √ 14,40,000
N= Annual Requirements is units
(No of Annual requirement = 500×12 = 6000 units)
O= Ordering Cost per order = Tk.120
¿ 1,200 units C = Annually Carrying Cost per unit = 10×10% = Tk.1
2) Tabular Method:

EOQ can be determined in Tabular Method as shown bellows:

Problem-1:
Table Showing Economic Order Quantity
Annual Number Numbe Total Average Total Total cost
requirement of r of Ordering Inventory Carrying cost (ordering
s Order units Cost @ No units per order@Tk.10 per +
(Units) per year per Tk.500 2 unit of Carrying
(Annual orders per order Average cost)
) inventory
Units Annual Tk. Units Tk. Tk. Tk.
1,600 1 1,600 500 800 8,000 8,500
2 800 1,000 400 4,000 5,000
3 533 1,500 267 2,670 4,170
4 400 2,000 200 2,000 4,000
5 320 2,500 160 1,600 4,100
EOQ: Placing order for 400 units per order in 4 orders, total cost (ordering cost + carrying)
extends at Tk.4,000 which is the minimum and both ordering cost and carrying cost at this
point are equal (Tk.2,000).
So, EOQ is 400 units.
3) Graphical Method:
1. Graph

2. Ordering Cost:
Ordering cost are the costs of ordering cost receiving inventory. They are the costs
that very which the actual placement of an order. Ordering costs …fgfg… additional
cost incurred on purchase, shipping cost, requisition cost inspection of goods or
arrival moving the goods to temporary storage, transportation cost, normal cost of
inventory etc.

3. Carrying cost (Holding cost):

Carrying costs are the costs that are incurred for carrying, holding or storing the
inventory for a particular period, usually on year. Carrying costs include interest
storage, …fgff…. Taxes, depreciation, obsolescence deterioration, spoilage
pilferage, warehousing cost (heat, light, rent society) etc.

4. Economic Production Size (EPS)

Economic Production Quantity (EPQ)
Economic Production Run (EPR)
Economic Lost Size
Economic production size/quantity is the quantity or number of goods to be produced
in a production run or batch. Considering the demanded of the product, production is
operated periodically in batches or lots instead of producing continually for
minimizing the cost. The number of units or quantity of goods produced in a single
batch or …tyfd..in a single lot in a certain period is called economic production
size/quantity/run or economic lot size.
2 NS
EPQ /EPS /EPR / ELS=
Where,
√ C

N = No of Production per units

S = Set of cost
C =Carrying Cost

Assumption of economic production quality (EPQ):

1. Annual demand for the product is known.
2. Only one item is involved.
3. The usage rate is constant.
4. Usage occurs continually but production occurs periodically.
5. The production rate is constant.
6. Lead time does not vary.
7. This is no quality discounts.
Problem-3:
A consumer has been ordering 5,000 units @ 1,000 units per order during last year. The
product cost is Tk.12 per unit (Tk.8 for material & labour, and Tk.4 for overheads). It
costs Tk.1,500 to set up for one run of 1,000 units and inventory carrying cost is 20% of
production cost. Since this customer may buy atleast 5,000 units this year, the company
would like to avoid making five different production runs.
You are required to determine the most Economic Production Run.
Solution:
2 NS Where,
EPR=
√ C
2× 5000× 1500
EPR = Economic Production Run
N = Number of Production per units per year
EPR=
√
1,50,00,000
2.4
= 5000 units
S = Set of cost for one run = Tk.1500
C =Carrying Cost = 12×20%
√
¿
2.4
¿ √ 62,50,000
= Tk.2.4

¿ 2500 units
5. Maximum Level or Maximum Stock
The level of inventory or stock that never exceeds is called maximum level or
maximum stock. Maximum quantity, units or limit of inventory at which the carrying
cost is reasonable is called maximum level.

Factors to be considered in determining Maximum level:

1. Average rate of consumption or demand.
2. Lead time.
3. Space of warehouse store room.
4. Carrying cost.
5. Economic Order Quantity (EOQ).
6. Stability of price.
7. Government regulations

Factors for determining Maximum level:

Maximum Level=( Reorder Level+ Reorder Quantity )−( Minimum Consumption × Minimum delivery ti

6. Minimum level or Minimum Stock

Minimum level is that level of inventory below or beyond which the inventory never
goes. This is the lowest limit or level of inventory an organization maximum. This
lowest level of inventory is also called safety stock or buffer stock.
Minimum Level=Reorder Level−(Normal Consumption∨Usage × Average delivery time)

7. Average stock or Average Level:

Average of Maximum level and Minimum level is called average level or average stock.

Maximum Level+ Minimum Level

Average Level=
2
8. Re-order level
The level of inventory at which re-order is placed for acquisition of inventory.
ℜorder Level=Maximum Usage× Maximum delivery period
Problem 4:
For the following information determine the following:
(i) Re-order Level
(ii) Maximum Level
(iii) Minimum Level
(iv)Average Level

Normal weekly requirement 800 kgs

Maximum weekly requirement 1200 kgs
Minimum weekly requirement 500 kgs
Period required for delivery 2 to 4 weeks
Re-order quantity 2000 kgs
Solution:
(i) Re-order Level:

ℜorder Level=Maximum Usage× Maximum Periodrequired for delivery

¿ 1200 ×4
¿ 4,800 kgs

(ii) Maximum Level:

Maximum Level=( Reorder Level+ Reorder Quantity )−( Minim umConsumption × Minimum delivery time)
¿ ( 4,800+ 2,000 )−(500× 2)
¿ 6,800−1,000
¿ 5,800 kgs
(iii) Minimum Level:

Minimum Level=Reorder Level−(Normal Consumption∨Usage × Average delivery time)

2+ 4
(
¿ 4,800− 800×
2 )
¿ 4,800 ¿
¿ 4,800−2,400
¿ 2,400 kgs
(iv)Average Level

Maximum Level+ Minimum Level

Average Level=
2
5,800+2,400
= 2
8,200
¿
2
¿ 4,100 kgs
Problem 6:
(a) Calculate EOQ from the following information:
Annual requirements 5,000 units, expected unit cost Tk. 4.50, ordering cost Tk. 49.70
per order and carrying cost 20%.
(b) In manufacturing its product a company uses three raw materials A, B, C in respect of
which the following apply:
 Raw Material Required for each Re-order Price per Delivery Period
unit of product Quantity kg Min Av Ma
e. x
A 10 kg 10,000 kg Tk. 10 1 2 3
B 6 kg 5,000 kg Tk. 30 3 4 5
C 6 kg 10,000 kg Tk. 15 2 3 4

Raw Materials Re-order level Maximum Level

A 8,000 -
B 4,700 -
C - 2,000 units

Weekly production varies from 175 units to 225 units averaging 200 units.
Calculate
(i) Minimum Stock of- A
(ii) Maximum Stock of- B
(iii) Re-order Level of- C

Solution:
2 NO
(a) EOQ=
√
Where,
C

N= Number of units required annually=5000 units

O= Ordering Cost per order= Tk. 49.70
C= Carrying Cost ¿ 4.50 × 20 %
¿ Tk .0.90
2 ×5,000 × 49.70
EOQ=
√ 4,97,000
0.90

√
¿
0.90
¿ √ 5,52,222.22
¿ 74311655
¿ 743 units
(b)
(i) Minimum Stock of A:
¿ Reorder Level−¿
¿ 8000−(2000 ×2)
¿ 8000−4000
¿ 4000 kg
***Note: Normal Usage of A:
¿ Average Weekly Production ×Usage Permit
¿ 200 ×10
¿ 2000 kg .
(ii) Maximum Stock of B:
¿ ( Reorder Level+ Reorder Quantity )−¿
¿ ( 4700+5000 )−(1050 × 3)
¿ 9700−3150
¿ 6500 kg
(iii) Re-Order Level of C:
¿ MaximumUsage × Maimum Delivery Period
¿ 1350 ×4
¿ 5400 kg
*** Note: Maximum Usage of C:
¿ Maxi ,u ,Weekly Productio × Usage Per Unite
¿ 225 ×6
¿ 1350 kg
 Project Management
Project Meaning definition :
In simple works, a project in an idea or I am that is intended to be carried out.
The dictionary meaning of a project is that it is a scheme design a project of something intended or
devised to be achieved.
For definitions of projects are stated below :
(1) “ A Project typically has a diction mission that in designed to achieve and clear termination
point, the achievement of the mission.
---------- Newman
(2) “ Project is the whole complex of activities involved is using resources to gain benefits “
----- gillinger.

(3) According to encydopoedia of management , “ A Project is an organized unit dedicated to the

attainment of a goal – the successful completion of a development project on time, within
budget , in conformance with pre-determined programme specifications”.

In fine, a project can be define as a scientifically involved work plan devised to achieve a
specific objective within a specified period of time.
Basic Features of a Project:
Projects may differ in their size, nature objectives, time duration and complexity, but they have the
following three basic features :
i) A course of action
ii) Specific objectives
iii) Definite time perspective .

Every project must have a starting point, as end point with specific objectives.
Types of project :
Different authorities have classified projects differently. Following are the major classifications of
project;
(1) Quantifiable and non –Quantifiable projects
(2) Sectoral projects
(3) Techno- Economic Projects
(4) Proposed projects & ongoing or executed projects.
(5) Mutually exclusive project and independent single project
(6) Contingent project
(i) Quantifiable and non –Quantifiable projects : Projects for which a reasonable
quantities assessment of benefits can be made are called quantifiable projects. Project
concerned with industrial development own generation, mineral development etc. fall in
this category. On the contrary, non quantifiable projects are those in which a plausible
quantitative assessment can not be made . Projects involving health education and defense
are the examples of non –Quantifiable projects.
 (ii) Sectoral Projects : according to this classifications a project may fool is any one the
following sectorals:
(i) Agriculture & Allied sector
(ii) Industry and mining sector
(iii) Irrigation & Power Sector
(iv) Transport and communication sectors
(v) Social service Sectors

(3) Techno-Economic Projects :

Projects of techno economic characteristics fall in this category. This types of classification included :
(i) Factor in intensity oriented classification
(ii) Causation oriented classification
(iii) Magnitude oriented classification

Factor in intensity oriented classification:

Based on factor intensity oriented classification projects may be of two types –
(i) Capital intensive
(ii) Labour intensive

Causation oriented classification : In causation oriented Classification , projects may be classified

as demand based or raw materials Based projects. The very existence of demand for certain goods or
services makes the of certain raw materials, s skills or others input, makes the projects raw material
based.
Magnitude oriented classification : In case of magnitude oriented based on the size of investment in
the projects. The project are classified as –
(1) Large Scale projects
(2) Medium scale projects
(3) Small scale projects,

(4) Proposed projects and ongoing or executed projects :

A Project for which project proposal has been made or given and the project which is yet to be
formulated and to be executed, is termed as proposed project. On the contrary, the project which is
formulated and already implemented is called executed projects.
(5) Mutually exclusive projects and independent single Project:
When acceptance of one project form among alternative projects reject others projects the projects are
termed as mutually exclusive projects. Incase of mutually excusive projects more than one projects
are prepared the best and most profitable project is accepted and other projects are rejected .
(6) Contingent Project:
Contingent project is one the formulation and implementation of which depends on the
implementation of the main project. A College hostel is a contingent project while the stablemen of
the college is the main or profited project.
Project Process / Steps in Project
Projects are prepared or formulated through some processor or steps each of which is very much
important . Process of Project or steps involved in formulation of projects are slated bellows:
1. Project Planning
2. Project formulation
3. Project Analysis/Evaluation / Appraisal
4. Project selection from among alternatives
5. Project financing
6. Project implementation
7. Project reviewing / Monitoring

Project Planning :
In the process of preparing a project, on entrepreneur has to drank animus a plan as to what he or she
intends to do or proposes to take up. Planning is deciding in advance what is to be done in future. It is
a projected course of with. So, the entrepreneur/entreprenenous with think in advance as to what kind
of business or project he/they desire(s) to established or short. Project plant is a kind of guide frost or
course of action what the entrepreneur hopes to achieve and how he is going to achieve it. Project
planning is like a kind of making big road map to reach the destination (that is a project) determined
by the entrepreneur. Thus the project planning can best be defined as with involved coursed of action
devised to achieve the specific objective written a specified period of time.
* Idea Generation and project identification.
While Project planning, the entrepreneur needs to generate a few ideas about the possible projects
he/she can undertake. Such ideas can be annotated form various internal and external resource which
are stated below:
i) Knowledge of potential customer needs
ii) Watering emerging trends in demands for certain projects.
iii) Scope for producing substitute products
iv) succeeds proines for known entrepreneurs friends or relations.
v) Working visits to trade fares and exhibitions displaying new products and session.
vi) Meeting with the Government agencies .
vii) Ideas from knowledgeable persons
viii) Knowledge about the Government policy, conseseion made incentives.
These ideas may help the entrepreneur to take up a suitable course of action and project
indent potation.
2. Project formulation :
Project Planning process helps entrepreneur in idea generation and project identification the second
process is project formulation which starts after the probable projects are identified. In this step
project is formulated which is generally known as project plan project profile or project report.
Project Report : Project report is a written statement of project plan. It serves like a big road map to
reach the destination determined by the entrepreneur. A project report can best be defined as a with
involved course of action devised to achieve the steadied objective writhes a specified period of time.
A project report is said to be an operating document.
Significance / Importance of Project Reports:
The preparation / formulation of project is of great significance/ importance as it serves the two most
essentional functions

Which are discussed below :

1)` Project report serves like a big road map.
It describes the direction the enterprise is going in what its goals are where it wants to be how it is
going to get there. It also enables the entrepreneur to know that he is proceeding in the reject
direction.
2) The second function of the project report.
Is to altheas Landers and investors. Financial institrions best and other technical organization within
investors many make appraisal on the basis of project report to identify strengths and weakness of the
organization and can take decision as to whether they with provide financial technical or other
assistance to the applying time.
Contents of a Project report :
Project report is of great significance and there is no substitute for well prepared project report. The
move detailed complete and concrete the project report the more attractive will be the project. So, the
project report needs to be proposed with great case and all necessary information should be included
in it. A good project report should contain the following contents :
1. General information :
2. Location :
3. Land and building :
4. Plant and machinery :
5. Promoter
6. Production Process:
7. Utilities :
8. Transport and communication:
9. Raw materials :
10. Manpower:
11. Products :
12. Markets :
13. Requirement of funds :
14. Requirement of working capital
15. Cost of production and profitability of 1st 10 (ten) years
16. Schedule of Implementation :
Formulation of Project Report.
Formulation of project report in very important for a project and hence utmost attention to be given
white formulating project report which is the pre-determinate project report which is the pre-
determiancse of action of a portiuleur project .
1. General information
2. Project description
3. Market Potential
4. Capital costs and sources of finance
5. Assessment of working capital requirement
6. Other financial agencies .
7. Economic and social variables .
8. Project implementation schedule.
1. General information :
* Bio-data of Promoter:
* Industry profile :
* Constitution and organization
* Product details:
2. Project description :
 Site
 Physical Infrastructure
 Raw Materials
 Skilled labor
 Power

Methods of Project Appraisal :-

1) Economic Analysis
2) Financial Analysis
3) Market Analysis
4) Technical Feasibility
5) Managerial competence
6. SWOT Analysis
(1) Economic Analysis:
* Requirement of the raw materials .
* Level of capacity utilization .
* Antiquated sales
* Antiquated expenses
* Volume of sales required for targeted project
* Industrial policy of the Govt.
* Investment policy of the Govt.
* Location of the enterprise.
* Demand for the products
* Others economic variables.
2. Financial Analysis
* Assessment of financial requirement for fixed capital
* Assessment of working capital requirement
* Assessment of capacity utilization
* Break even analysis
* Cost of capital

3. Markets potential
* Market strategy
* After Sales services
* Transportation
Project Appraisal Analysis Evaluation:

Simply speaking, Project appraisal analysis or evolution means assessment of a project. This appraisal
is applicable for both proposal projects and executed project. In case of proposal project, Project
appraisal is called ex-anti analysis and in own decision, Project appraisal is related to proposed
projects.

Project appraisal is the cost and benefit analysis of different aspects of proposed project with an
objective to adjudge its viability. A project involved employment of capital or resources and in
entrepreneur needs to appraise various alternative project before selecting and allocating resources to
the best project selected from among the alterative projects. For the appraisal of a project its
economic, financial, technical market managerial social aspects are analyzed for judging its
profitability, viability and feasibility. Financed institutions conduct project appraisal to causes into
credit worthiness before a financial institution is a process whereby a leading financial institution
makes an in independent and objective assessment of the various aspect of an investment proposition
for arriving at a financial decision.
Opinion Pulling method :
In this method, opinions of the ultimate customers is estimated with the help of either completed
survey of all customers or sample survey.
a) Complete enumeration survey :
b) Sample survey :
c) Sales experience method:
d) Vicarious Method:
e) Life cycle segmentation analysis method.
Phases of Project Management :
Managing any Project involved 4(four) key phases which are :
i) Conceptual phase.
ii) Planning phase.
iii) Implementation and control phase.
iv) Feed back or post project appraisal.

The phases are shown in a diagram.

Conceptual phase Conceptual design, scope, objectives , Project appraisal
budgeting
Planning Phase Work break down structure organization breakdown structure
( Materials , equipment, Budget Labour.)
Implementation Phase Resources management Performance appraisal Materials &
contracts management managing risk & uncertainly
Feed Back Post Project Appraisal

3 Breakdown structures in Planning Phase of Project management :

Planning phase of Project management has been structured as follows:
(1) Work breakdown structure ( WBS )
(2) Organization Break down structure ( OBS )
(3) Cost Break down structure ( CBS )

(1) Work breakdown structure ( WBS ) : Work break down structure

( WBS) is an organized methodology to split an overall project into non-overlapping components and
identifying deliverables for each component.
WBS serves the important task of providing a clarified in a project and provides the reference for
estimating activity duration network representation of the project, Planning monitoring and control.
(2) Organization breakdown Structure ( DBS) : An organization breakdown structure indentifies
an appropriate organizational structure to execute to task listed under each work package as per work
breakdown structure. Based on nature of took works involved the functional expertise required in
identified for each element of work breakdown structure.
(3) Cost Breakdown Structure ( CBS ) : Cost breakdown structure is a methodology that links the
individual elements in a work breakdown to a dimension of cost. By estimating cost of each work
package that constitutes and element in the work. Break won structure , cost break down enables a
project manager to set up a project monitoring and control mechanism. Cost breakdown structure
provides the useful means for cost control budgetary control and review.

Project Scheduling Project network analysis :

Project network is a nest of symbol connected with each other with a sequential relationship with each
step making the completion of the project. A project involves various activities to be unoprtaken to
convert it into an enterprise. delays in the completion of activities cause among other things cost
governments , Hence there is a need for deciding the sequential order of all the activities of the project
so as to acceptation the project economically in the minimum assailable time with the limited
resources. This project network is also called project scheduling. A numbers of network techniques
have been developed for project scheduling . Some of them are stated below :
(1) Programme Evaluation and Preview Technique ( PERT ).
(2) Critical Path Method ( CPM)
(3) Graphical Evaluation and Review Technique ( GERT )
(4) Workshop analysis scheduling Program ( WASP )
(5) Line of Balance ( LOB)

PERT & CPM are Discussed Below:

(1) Programme evaluation and Review :
Technique ( Pert ): Pert was first developed as a management AID for completing Polaris ballistic
Missile Project in USA in Detober 1958. It worked well in esepediting the completion of the project
from 7 year to 5 years. Since than PERT has planning and control.
PERT Schedents the sequence of Activities to be completed in order to accomplish the project within
a short period of time. It helps reduce both the time and cost of the project.
Steps involved in PERT :
The following steps are involved in PERT:
1. The activities involved in the project are down up in a sequential
relationship to show what activity follows what.
 2. The time required for completing each activity of the project is estimated and noted on
network.
3. The critical activities of the project are determined.
4. The variability of the project duration and probability of the project completion in on given
time period are consulate.
5. The above steps can be illustrated with the following example. The Project in decomposed in
to the following activities:

Job Identification Job Description Activity Time required

A Forecasting of Sales 1-2 10 Days
B Sales Pricing 2-4 08 Days
C Production Scheduling 2-3 09 Days
D Cost determination 3-4 7 Days
E Preparation of Budget 4-5 12 Days

with the above data in the example, the following diagram can be drawn up:
8 days 4
10 days B 12 days
(1) A (2) 7 days D E
C 9 days
Fig: PERT Networking 3 5

Advantages of PERT :
1. It determines the expected time required for completing each activity.
2. It helps to complete the project within a given time period .
3. It helps managements to handle uncertain involved in the project and this , reduce the risk element
in the project.
4. It enable management to make objection allocation of limited resources.
5. It process for the right action at the right point at the right time in the organization.
(2) Critical Path Method ( CPM) :
The critical path Method ( CPM) was first developed is USA by E1. Dupont Nemours & Co. in 1956
for doing periodic overhunting and amitienoce of a chemical plaint. It resorted in redoing the
shutdown period from 130 hour to 90 hours saving the company $ 1 million.
The CPM differentiates between planning and scheduling of the project planning reform to the
determination of activities to be accomplished for each activity of the project. The duration of
different activities in CPM are deterministic.
 The CPM techniques of a research project is illustrated below with example- the following activities
are identified in the project:
Job Job Description Activity Time required
Identification
A Preparation of dealer questionnaire 1-2 10 days
B Preparation of consumer questionnaire. 1-4 10 days
C Dealer survey 2-3 20 days
D Consumer Survey 4-5 60 days
E Processing and Interpellation of dealer data 3-6 10 days
F Processing and Interpellation of consumer survey 5-6 30 days
data
Total = 140 days

Now with the data given in the example, the following diagram can be drawn up :

10 days 2 20 Days 3
1 A C 10 days
E
10 days 30 days 6
B 4 60 days 5
D F
Fig: CPM
Advantage of CPM:
1. It helps in asartaining the time schedule of activation having sequential relationship.
2. It makes control easier for management.
3. It identifies the most ordinal elements in the project thus the management is kept Alert and
prepared activities of the project.
4. It makes better and detailed planning possible.
 Facility Location
Meaning & Definition:

Location of facility of prime importance for the access of an organization. So location

decision must be taken very carefully.
Location decision pertains to the choice of an appropriate geographic site for locating various
manufacturing and service facilities of an organizations. A firm may have to locate several
operating units to catchto the requirements of the market. At one extreme, it is possible to
have a single location in which all the facilities could be located. At the other extreme, many
facilities are located in as many markets so that it is easy to access customer. Both the
extremes may prove inappropriate. So, operations managers need to arrive at optimal location
of facilities.

Factors to be considered which taking location decisions:

For appropriate or suitable location decision following important factors must be considered.
1. Availability of Raw Materials.
2. Infrastructural facilities (transfer and communication, water, power, gs, banking etc).
3. Availability of manpower, labor,
4. Market
5. Ecological and environmental factors (Water and air pollution).
6. Government Policy
7. Local Law & regulation.
8. Completion
9. Safety and security.

Steps in Location Planning:

A location planning requires the following three steps.
1. Identifying Act of factors that could influence the location decision.
2. Establishing the relative importance of these measures (factors) for the location
decision.
3. Developing a methodology to assess the impact of these factors.
4. Taking the facility location decision and making the plan.

Factors Affecting Location Decissions:

There are many factors that affect location decision and such needs to be considered for
location decisions, which are classified in four categories as stated below.

1. Market related factors:

 Market for products & services.
 Raw material availability.
 Number and proximity of suppliers.
 Availability of skilled labor.
 Quality of infrastructure.
2. Cost related factors:
 Wage rate
 Transportation cost
 Tax & other tariffs
3. Government Regulatory & Policy related factors:
 Government & economic stability.
 Quality of legal and other institution.
  Trading Block.
4. Other Factors
 Culture
 Climate
 Quality of Life
 Safety & Security
 Environment.

Location Primary and decision method:

Generally, location decision can be one of the two:
i) One facility, multiple candidates
ii) Multiple facility, multiple candidates.

For location decision the following methods are used:

1. Location factors rating method.
2. Center of gravity method.
3. Load-distance method.
4. Transportation model method.
1. Location factors Rating:
Location factor rating is a simple method to assess the attractiveness of each potential
location. This method involves 4 steps which are as below.

i) To identify and list all the relevant factors for the location decision.
ii) To establish the relative importance of each factor in the final decision.
iii) To rate the performance of each candidate location using a rating mechanism.
iv) To compute a total score for each location based on its performance against each
factor and to rank. Then in the decreasing order of the score.
In this method it is observed that first of all the relevant factors are identified their relative
importance is established the performance of each location in each factor is assessed and
finally all the information is combined to rank the location.

Example:
An industrialist or a manufacturing firm is actively considering 5 (Five) alternative location
for setting a advantages to the firm. Hence the form requires to identify the most appropriate
location. Based on a survey the firm has arrived at 6 (Six) factors to be considered for final
site selection. The ratings of each factors on a scale of 1 to 100 provide this information.
Further based on the detailed of both the qualitative andquantitative date available for each of
the locations the ratings of the ratings of the location against each factor have also been
arrived at. Using this information obtaina ranking of the alternative location and suggest as to
which location should be selected.

Rating of each location against each factors.

Locatio Locatio Locatio Locatio Locatio
Factor Identified Ratings
n1 n2 n3 n4 n5
1 2 3 4 5
1. Availability of
Infrastructure 90 20 40 60 35 55
2. Size of the Market 60 30 30 40 60 80
3. Industrial Relation
Climate 50 80 30 50 60 50
4. Tax benefits &
Concession 30 80 20 10 20 20
5. Availability of
cheap labor 30 70 70 45 50 50
6. Nearness to port 65 20 40 90 50 60
325
Solution:
Establishing the relative importance (Relative Weights) through normalisetion

Normalises
Factors Rating
(Relative Weights)
1. Availability of Firm 90 90/325 0.28
Size of the Market 60 60/325 0.18
Industry Relation Climate 50 50/325 0.15
Tax Benefit & Concession 30 30/325 0.09
Average of Cheap Labor 30 30/325 0.09
Nearness to Port 65 65/325 0.2
0.99

Computing the performance of each Location

Relativ
Performance of the Location (Weight * Rate)
e
Factors
Weight
Location Location Location Location
s
Location 1 2 3 4 5
. . .
Availability of unit Structure 0.28 .28*20=5.6 28*40=11.2 28*60=16.8 .28*35=9.8 28*55=15.4
. .
Size of Market 0.18 .18*30=5.4 .18*30=5.4 .18*40=7.2 18*60=10.8 18*80=14.4
Ind. Relation Climate 0.15 .15*80=12.0 .15*30=4.5 .15*50=7.5 .15*60=9.0 .15*50=7.5
Tax Benefit 7 Concession 0.09 .90*80=7.2 .90*20=1.8 .09*10=0.9 .09*20=1.8 .09*20=1.8
.
Available of Cheap Labor 0.09 .09*70=6.3 .90*70=6.3 09*45=4.05 .09*50=4.5 .09*50=4.5
. . .
Nearness of Port 0.2 .20*20=4.0 .20*40=8.0 20*90=18.0 20*50=10.0 20*60=12.0
Overall Score for the
Location   40.5 37.2 54.45 45.9 65.9
Ranking of the Location   4 5 2 3 1

Comments:
It is seen/ observed that location 5 ranked 1 st among all the 5 location composed to their
overall score followed by location 3. So it can be advised to select location 5 for setting up
factory. Final Selection needs further analysis by calculating score information about cost and
distance.
2. Centre of Gravity Method:
Centre for Gravity Method merely indicated the ideal location in the grid map that would
ensure that the weighted distances traveled on the whole is maximum often location
planners tend to use a distance measure to evaluate the impact of a proposed location such
as approach has merit when there is a dominant requirement for locating close to the
market for products or for raw materials is supplied from several location, are represented
in a Cartesian coordinate system. Each demand or supply point with alsohave weight
which indicated the quantum of demand or supply per unit. In this context it is possible to
identify the center of gravity of the various demand or the supply point will be more
appreciated.

3. Load-Distance Method:
Load distance method enables a location planner to evaluate two or more potential
candidates for location a proposed facility VIS-a_Vis the demand or supply points. The
load-distance method provides objective measure of the total load-distance for each of the
potential candidates. Choosing the location with best load-distance among these will
satisfy the objective of identifying an appropriate location for the proposed facility.
Distance is measured using a Cartesian measure.
The distance measure for the Cartesian coordinates between and existing demand or
supply and candidate for the proposed facility Dij may be given below.

The load distance for a candidate j for the proposed facility LDj is the product of the
distance between the candidate and all existing demand or supply points. It can be
computed as follows.

4. Transportation Method:
In the previous method we have confirmed ourselvs to the issue of choosing one location
for the proposed new facility out of several alternatives but in reality there are several
situation that prompt an organization to select multiple location instead of just one.
 Location problm in the case of multiple plantsand multiple demand points can be selected
using the standard transportation model.
The transportation model can be used to optimally identify a sub-set of supply point from
a potential list that can satsfy the demand at various demand points. These is a unit
transportation cost of shipping material from every supply point to every demand point
and by an optimal choice of supply points, total cost of transportation is minimised.
The figure below shows the typical representation of an transportation problem.

Factory Market 1 Market 2 Market 3 Market 4 Market 5 Supply

  100   70 50 30  
A     40 600
30
  90 40 120  
50
B       400
20
  80   40  
30
C   70   700

  80   140   80
 
D   90 90 200

Deman
200 450 300 550 400 1900
d
 Forecasting
Definition:
When estimate of future conditions are made on a systematic basis, the
process is referred to as forecasting and the figure or statement obtained is
known as forecasting. Forecasting is a service whose purpose is to offer the
best available basis for management expectation of the future and to help
management understand the implications for the firms future of the
alternative courses of action to them at present. Where the future is not
known as certainty, virtually every business and economic decision rests upon
a forecast of future conditions.
Forecasting concerned with two main tasks: first the determination of the best
basis available for the formation of intelligent management expectation and
second, the handling of uncertainty about the future so that the implication of
decision become explicit.
Forecasting is commonly applied to capital investment decision, strategic
planning, product and market planning, production planning and stock control,
budgeting control and so on.
Main function of forecasting/use/importance:
1. The creation of plans of action. It is impossible to involve a worthwhile
system of business control without an acceptable system of forecasting.
2. The second general use of forecasting is to be found in monitoring the
continuing programs of plans based on forecast. Forecast serve the
function of high houses to shipments at night, reference points for
courses and speed requiring action or no action decision.
3. The forecast provide a warning system of the critical factors to be
monitored regularly become they might drastically affect the
performance of the plan.

It is obvious form the above the forecast intelligently used may serve the
function of both light house and compass. However, the object of
forecasting is not to determine a curve of service if figures that will tell
exactly what will happen in future but it is to make analysis based on
definite statistical data which may possible help successfully prediction.
Some other key functions of forecasting:
4. An estimation tool.
5. A way of addressing the complex and uncertain environment
surrounding business decision making
6. A tool for predicting events related to operations planning and control.
 Common features of forecasting:
A wide variety of forecasting techniques are in use. In many respect they
are quite different from each other and one another, but certain features
are common to all which are stated below:
1. Forecasting techniques generally assume that the same underlying
causal system that existed in the past will continue to exist in the future.
2. Forecasting are rarely perfect; actual result usually differ from predicted
value.
3. Forecasts for groups of items tend to be more accurate than forecasts
for individual items because forecasting errors among items in a group
usually have a canceling affect.
4. Forecast accuracy decrease as the time period covered by the forecasts.

Steps in forecasting process:

These are six basic steps in the forecasting process: these are as follows:
1. Determine the purpose of the forecast.
2. Establish a time horizon.
3. Select a forecasting technique.
4. Collect and analysis relevant data.
5. Make the forecast.
6. Monitor the forecast.

Element of a good forecast:

1. The forecast should be timely.
2. The forecast should be accurate and the degree of accuracy should be
stated.
3. The forecast should be reliable.
4. The forecast should be expressed in meaningful units.
5. The forecast should be in writing.
6. The forecast technique should be simple to understand to use.
7. The forecast should be cost effective.
8. Forecast should involve the managers whose decisions are affective.
9. Individual forecast and group forecasts should be specifically relevant to
the decision being taken.
10. The forecast must not claim too much validity or authority.

Method of forecasting:
To handle the increasing variety of forecasting problem, many forecasting
techniques have been developed in recent years. Each has its special use
and care must be taken to select and correct technique for particular
application or use.
The following are some of the important method of forecasting:
1. Historical analogy method.
2. Field surveys and opinion poll.
3. Business barometer.
4. Extrapolation.
5. Regression analysis.
6. Time service analysis.
7. Exponential smoothing.
8. Economic model.

Some of the method of forecasting discussed below:

1. Extrapolation: extrapolation is the simplest but useful method of

forecasting. It is the method by which unknown values can be estimated
or future values can be forecasted with the help of known values of the
services. In many forecasting situation the most reasonable expectation
is that the variable will follow its already established path. Extrapolation
relies on the relative consistency in the pattern of the past movements
in the same time series. Nothing needs to be known about causation as
to why the series moves as it does. But in practice the justification for
extrapolation does involve the growth process being described.
Extrapolation is used frequently foe sales forecast and for other
estimates when better forecasting method may not be justified.

Since extrapolation assumes that the variable will follows its established
pattern growth the problem is to determine accurately. The appropriate
trend curve and the value of its parameters numerous alternative trend
curves are suitable for business forecasting application, which are:
 Arithmetic trend
 Semi-log trend
 Modified exponential trend
 Logistic curve

Newton’s forward formulation can also help in forecasting.

Why Do We Forecast?
Since forecasting activity typically precedes a planning process one can identify
specificreasons for the use of forecasting in organisations.Organisations face a
different set ofissues while they engage in planning and in each of these
forecasting plays an importantrole as a tool for the planning process.Based on
the examples above,we can summarisethe key areas of application of
forecasting as below:
Dynamic and complex environment:Only if an organisation has complete
controlover market forces and knows exactly what the sale of its products is
going to be in thefuture,is there no role for forecasting.However,as we have
already seen,this is not thecase in reality.Therefore,forecasting will be an
important activity.
Short-term fluctuations in production:A good forecasting system will be able
topredict the occurrence of short-term fluctuations in demand.Therefore,from
thisknowledge,organisations can avoid knee jerk reactions to the unfolding
reality.Production planning decisions could utilise this information and develop
plans thatminimise the costs of adjusting the production system for short-term
fluctuations.
Better materials management:Since the impending events in an organisation
arepredicted through a forecasting system,organisations can benefit from
better materialsmanagement and ensure better resources
availability.Returning to the fast food jointexample,if the owner could predict
the occurrence of peak hours in his joint,he wouldhave planned and ensured
better material and resources availability.
Rationalised man-power decisions:A forecasting system provides useful
informationon the nature of resources required,their timing and
magnitude.Therefore,organisationscould minimise hiring and laying-
offdecisions. Moreover,better planning on overtimeand idle time could also be
done based on this information.
Basis for planning and scheduling:The above uses of forecasting clearly point to
thefact that planning and scheduling of activities could be done on a rational
basis.
Strategic decisions:Our earlier example of microwave ovens suggests that
forecastingplays an important role in long-term strategic decision-making.This
includes planningfor product line decisions,new products,augmenting
capacity,building new factoriesand expanding the current level of activities.In
each of these,an understanding of theunfolding future is key to the decision-
making and forecasting plays a role in providingthis information.
Forecasting Time Horizon
Use of forecasting is clearly pervasive.However,the type of data used,the
nature ofanalysis done and the tools and techniques employed could vary from
one situation toanother.It is,therefore,useful to understand what causes these
variations and how onecan sub-classify and group them into homogenous
units.Amongst other parameters,time horizon for forecasting provides a sound
basis for classification.The threecategories include short-term,medium-term
and long-term.Table 10.1 lists the salientfeatures of this classification.
Short-term Forecasting
Typically,short-term forecasting is employed to fine tune an existing plan based
on thenew information obtained. The forecasting acts as an input to tactical
decisions that anorganisation makes.For example,based on the sales in the last
quarter,an organization would like to make better estimates of the demand in
the next quarter and use thatinformation for adjusting various quarterly
plans.The errors in forecasting that aresought to be corrected by an alternative
estimate are more related to random events thanany long-term cyclical
patterns or medium-term seasonal patterns.The forecasting datais used in a
disaggregated fashion and analysed in detail.For example,the sales data willbe
analysed by region and product variety for possible short-term impact in a
particularregion or a variant of a product.Specific corrective measures could be
taken after analysisof the data.The techniques used in this case are simple
extrapolation of the immediatepast data and mechanisms for incorporation of
new data and period-by-periodadjustments.
Medium-term Forecasting
An organisation uses forecasting as a starting point to the annual business
planningexercise.This typically constitutes medium-term forecasting.In
medium-termforecasting,the planning horizon is usually 12-18 months.During
this period,someaggregation of data is done.For example,if an organisation
offers 15 variations of aproduct,the demand for the product is estimated at an
aggregate level.Based on thisinformation,capacity and material plans could be
made.Since the forecasting is done fora slightly longer time,cyclical and
seasonal patterns will make a significant impact andneed to be incorporated in
the analysis.The decisions taken using the forecastinginformation vary from
purely tactical decisions,such as annual production planning,tosomewhat
strategic,such as augmentation of capacity in specific areas of
business.Forecasting techniques should be able to handle these
requirements.Use of extrapolativemethods,some subjective judgment and
regression-based methodologies are oftenemployed in medium-term
forecasting.
Long-term Forecasting
Long-term forecasts involve purely strategic decisions for a time period of
about 5-10years and hence,the forecasting processes need to cater to these
requirements.Forinstance,an organisation may be interested in projecting the
future technology trends intheir business and use it as the basis for developing
new products,productiontechnology and human and other resources.Strategic
decisions substantially drawsubjective knowledge from the expertise of senior
management personnel in an organisation involved in the decision-
making.Furthermore,the level of uncertainty inthe process tends to be
high.Therefore,the forecasting methodology should be able to use this data
and develop reliable estimates Some amount of detailed modelling based
onsome macro-level assumptions is often required.

DESIGN OF FORECASTING SYSTEMS

Designing and using a forecasting system in an organisation involves three
importantforecasting system in anstages,as shown in Figure 10.1.In stage 1,an
organisation needs to address theorganisation involvesrequirements for the
forecasting system and identify an appropriate time horizon.On thebasis of
these,it needs to further identify a suitable technique,collect data,construct
theforecasting logic using available tools and techniques and test for logical
and empiricalBuild and validate avalidity using some past data.
Once the designer is satisfied with the forecasting logic,the next stage
involvesdeveloping control mechanisms for using the forecasting system.This
requiresestablishing some performance measures and subjecting the forecasts
obtained from themanagerial judgementsystem for reliability from time to
time.If,after some time,the forecasting system isconsistently biased, then the
basic logic may require a review.In the third stage,the focusis on using the
estimates obtained from a forecasting system with a
managerialperspective.Merely taking the output from a forecasting system and
making decisionsbased on these estimates is not sound managerial practice.On
several occasions,managers need to understand the need for incorporating
additional information notcaptured by the forecasting system.We shall look at
each of these three stages in somedetail in the rest of the chapter.
Stage 1
Develop a forecasting logic by identifying the purpose,data and models to be
used.
Stage 2
Establish control mechanisms to obtain reliable forecasts.
Stage 3
Incorporate managerial considerations in using the forecasting system.
DEVELOPING A FORECASTING LOGIC
Figure 10.2 describes the various steps involved in developing a forecasting
logic.Thefirst step in the process is to have clarity on the purpose behind
developing theforecasting system.Is the organisation interested in launching
new product lines in thenear future?Is it contemplating on the nature of
resources required to meet productiontargets for the next year?Or is it
analysing the impact of short-term changes in thedemand with a view to adjust
the capacity to meet the demand?Much of the logic behinddeveloping a
forecasting system critically depends on these issues,as we have
alreadyseen.In the first case weare aiming at a long-term horizon,whereas in
the second case weare addressing a medium-term requirement.In the last case
we focus on short-termrequirements.As we have already seen,the type of data
required for developing a systemin each of these cases and the nature of
decisions to which the output from the torecastingsystem is put differs
significantly.Hence,the first step in developing a forecasting logic isto
unambiguously identify the purpose.
Once the purpose,the time horizon and the nature of data required are
clearlyidentified,the next step in the process involves choosing an appropriate
model from theavailable set.This is easily done by collecting sample data and
analysing them usingsimple tools such as visual inspection and statistical
measures.This is an important stepto understand any specific requirements of
the proposed forecasting system.Forinstance,let us assume that an
organisation is interested in developing a forecastingsystem for estimating the
yearly demand of the equipment that they manufacture forproduction
planning purposes.Suppose a sample sales data for a year for the equipmentis
collected and plotted.From the plot the organisation may get to know if there
is apronounced seasonal pattern.In which case,the model should be able to
handleseasonality.Similarly,the plot of the data may also sometimes show the
significantimpact of business cycles.Understanding these patterns in the data
will help in choosingan appropriate set of models as possible candidates for
consideration.On the basis ofthese analyses,one can select an appropriate
model for active consideration.
The next stage involves developing the forecasting logic for the model
selected.Eachmodel has some parameters that are to be fixed.For example,if
an organisation wants touse a simple moving average technique for forecasting
future demand,then the modelparameter is the number of periods for moving
average.In other models there may bemore parameters.Based on the sample
data,the parameters of the selected models need tobe established.Once the
model parameters are established,the organisation could usethe logic for
forecasting.
However,before putting it to use,the adequacy of the model and the
forecasting logicneeds to be tested.This could be done using historical data and
comparing it with theforecasts obtained from the logic developed.If the
forecasts obtained compareconsistently and favourably with the actual
data,then the model can be assumed to beadequate.In some cases,there may
be significant deviations between these two.In suchcases,the forecasting logic
needs to be re-examined and some of the model parametersneed to be
adjusted.Alternatively,an altogether new model may have to be considered.
After a few iterative procedures,the designer may be convinced that the
modelselected and the logic developed for forecasting are
satisfactory.Reaching such a levelindicates that the organisation has completed
the first stage in the design and use of aforecasting system.
 Supply Chain Management
Meaning of Definition :
Supply Chain :
A Supply chain is the sequence of organisations. Their facilities, function
and activities that are involved in production and distribution of a product of
services. The sequence begins with basic suppliers of row materials and extends
all the way to final customers. Facilities include warehouses, factories,
processing centers, distribution centers, retail outlets and offices. Functions and
activities includes forecasting, purchasing, inventory management, information
management, quality assurance scheduling, production, distribution and
customer services. So, the Supply chain includes a chain of different
organisation involved in planning, procurement, production and distribution of
products and services to the end customers.
There are two kinds of movements in supply chain syoterns which are
a) The physical movement of national generally in the direction of the end of
the chain and
b) Exchange of information move in both direction is the chain.
Supply chain may be manufacturing or service oriented as shown below:

Supplier

Supplier Storage Manuf. Storage Distribution Relation

Supplier Customer

Fig: Typical Manufacturing Supply Chain

Supplier
Storage Service Customer
Supplier

Fig: Typical Service Supply Chain

Supply Chain Management :

Supply Chain Management refers to management of all function,

facilities and activities both within and external to a business organisation that
make a value Chain.
Supply Chain are refused to value chains goods services program though
the chains. The supply or value chain has two component and a demand
component starts at the beginning of the chain and ends with the internal
operation of the chain starts at the point where the organisation output is
delivered to its immediate customer and ends with the final customer in the
chain. The demand chain is the sales and distribution position of the value
chain.
So, the management of the sequence of organisation their facilities function and
activities that are involved in production and distribution of product and
services that make a value chain is called supply chain management.

Need for Good Supply Chain Management :

A number of factors make it desirable for business organisation to actively

manage their supply chains. The major factors are disused below :
1. The need to improve operations :
The operations of the organisation can be improved with the help of good
improvement, distination and logistics- the supply chain management.
2. Increasing level of outsourcing :
Organisation are increasing their levels of outsourcing buying goods on
services instead of outsourcing on providing then themselves. As
outsourcing increases orgaznisation are spending increasing amounts on
supply related activities such as wrapping, packaging loading, unloading,
stores etc. A significant amount of cost and time spent on these may be
served.
3. Increasing Nousportation Cost :
Increasing Irausportation cost can be carefully managed by supply chain
management.
4. Competitive Pressures :
Competative pressures have led to an increasing number of new products,
shorter product development cycles and increased demand for
customisation.
5. Increasing globalization has expanded the physical length of supply chains.
A global supply chain increases the challages of managing a supply chain.
Far flung customer, suppliers are the cause of longs lead time and disruption
of deliveries. Supply chain management is of great importance in
6. Increasing importance of E-commerce has added new dimensions to
business buying and selling and has presented challenges which can be met
by effective supply chain management.
7. The need to manage inventories :
Inventories play a major role in the success on failure of a supply chain. So,
it is important to co-ordinate levels throughout a supply a supply chain.
Benefits of Effective Supply Chain Management :
Effective supply Chain Management offers numerous benefits to the
organisation. Generally benefits of effective supply chain management include
the flowing :
 1. Lower inventories
2. Higher productivity
3. Lower costs
4. greats ability
5. shorter lead time
6. Higher profits
7. Greater customer service
8. Greater customer loyalty
Elements of Supply Chain Management :
The key elements of supply chain management are discussed below :
1. Customers :
The driving element is customer. Typically, marketing is responsible for
determining who are the customers and what products and/or, services they
want.
2. Forecasting : The second element is forecasting on predicating the quantity
and timing of customer demands.
3. Design : product and /or, service design must match customer’s wants.
4. Capacity Planning : Capacity planning should be matching supply and
demand.
5. Processing : A scheduling work and portion of processing occurs in the
organisation that produces the product on service for the final customer.
6. Inventory : Inventory is staple in most supply chains, meeting demand
requirement of the customers while managing the cost of holding inventory
is very much important.
7. Purchasing : Purchasing is the link between an organisation and its suppliers.
It is responsible for obtaining goods/and on, services that will be used for the
customers. Purchasing selects suppliers, negotiates contractors, establishes
alliances and acts as liaison between suppliers and various internal
departments.
8. Suppliers :
Co-ordination between suppliers and all the member of the demand portion
is very much important monitoring suppliers quantity on time delivery
maintaining supplier relation are needed to handle carefully.
9. Location :
Location is an important element of supply chain management. Determining
the location facility, nearness to market, nearness to success of supply and
demand have impact on supply chain management.
10. Logistic:
Logistic refers to movement of materials and information us a supply chain.
Materials include row materials, work in progren, item like, fuel, equipment,
parts, tools, office supplies etc. Logistics include movement within a facility,
overseeing incoming and outgoing shipments of goods and materials and
information flow throughout the supply chain.
 Steps in Creating on Effective Supply Chain
The following key steps are necessary for creating an effective supply chain :

1. Develop Strategic objectives and tactics :

Developing strategic objects and tactics guide the poems for creating an
effective supply chain.
2. Integrate and co-ordinate activities in the internal portion of the chain :
This requires :
a) Overcoming barriers caused by the functional thinking that lead to
attempts to optimize sub-act of a system rather them system as a whole
and
b) transferring data and co-ordinating activities.
3. Co-ordinate activities with suppliers and with customers:
This involves addressing supply and demand issues.
4. Co-ordinate activities with suppliers and with customers :
This requires a system for transferring data across the supply chain and
allowing access to data to those who engage in operation to which it will be
useful.
5. Consider the possibilities of for coming strategic partnership:
Strategic partnering occurs when two on more business organisations that
have complementary products on services that would strategically benefit the
there agree to join so that each may realize strategic benefit. One why this
may occur is when a supplier agree to hold invention for a customer these by
redning the customer’s cost of holding the inventory.
Components of Supply Chain:
Supply chains are made up of the following 3 (three) distributive components
on entities:
1. In-bound Supply Chain
2. In-house Supply Chain
3. Out-bound Supply Chain.
1) In-bound supply chain includes a host of raw material and compound
suppliers respond suppliers. These suppliers respond to the production plan
of the manufacturer by supplying raw materials and components.
Manufacture of machine tools may require a variety of rolled steel, steel
bars, castings forgings etc, in case of hospitality industry such as a chain of
hotels, supplier provide transferation facilities, ticketing, reservation, laundry
facilities to the guests even Medicare to handle emergency requirements.
A greater degree of co-ordination is required between the manufacturing
planning and procurement functions are an organisation to effectively manage
an in-bond supply chain. This is due to the fact that in-bond supply chain
management primarily deals with issues related to identifying sources of supply
developing strategic relationships with these sources and creating competitive
position on the basis of the these relationships.
 Method to organise the in-bond supply chain is to create tiers of
suppliers. An illustration of the tiers in an in-bond supply chain in the case of
automotive industry is shown below :

Wiring Auto Upholstery Transmission Tier 1

harness electrical

Spindles & Insulators Castings Gears

armatures & bushes
Tier 2
Copper Spindles & Forging
plates Shafts blanks
wires

Copper Iron Steel

management Tier 3
Management

Fig: In-bound Supply chain- An example from automotive Industry.

2. In-house supply chain :
The in-house component of the supply chain relates to the physical
configuration of the conversion process. The raw materials and components
sourced from various suppliers are launched into the production system and
converted into useful finished goods. Managing this component of the supply
chain involves designing of the manufacturing system, facilities management,
layout and location of resources and material handling.
The in-house supply chain can be broadly divioled into the core
manufacturing layer and manufacturing support layer which is shown below in
a diagram.
 Core Manufacturing layer

Pre manufacturing

Machining Fabrication

Assembly Testing

Manufacturing Support layer

Marketing It Maintenance Planning

Quality Material Design Costing

Fig: Typical Configuration of In-house supply chain

3. Out-bound supply chain relates to the distribution of goods and services to
the end customers. This includes distribution network design, warehousing,
logistics planning, channel managing customer interfaces.
A typical out-bound supply chain for fast moving consumer goods- soups
and detergents which consists of 4 (four) levels and detergents which consists of
4 (four) levels is shown below in a diagram :
Soap Manufacturing factories

Distribution
factory warehouse Centers 1
Distribution
North East West Sout Central Centers 2
Distribution
SD SD SD SD SD SD SD Centers 3

RO RO RO RO RO RO Retail
Outlets 4

END CUSTOMERS

Fig: Typical Out-bound Supply Chain