Value Analysis

Value Analysis (Definition):

A process of systematic review that is applied to ​existing product/service designs in order to compare
the function of the product/service required by a customer to meet their requirements at the lowest
cost consistent with the specified performance and reliability needed.
We can also say that, Value Analysis is an organized procedure for efficient identification of
unnecessary costs associated with material, part, component, system, or service by analysis of function
and efficiently eliminating them (i.e., unnecessary costs) without impairing the quality, functional
capacity or its reliability. Value Analysis contributes to improve profitability.
A significant part of Value Analysis is called Functional Analysis, where the product is broken down
and reviewed as a number of assemblies. Here, the function is identified and defined for each product
assembly. Costs are also assigned to each one.

Objectives of Value Analysis:

1. To provide better value to a product/service

2. To improve the company’s competitive position

3. To ensure that every element of cost (Labour, Materials, Suppliers & Service) contribute equally to
the function of the product

4. To eliminate unnecessary costs

What is Value?
Value can be defined as the combination of quality, efficiency, price and service which ensures the
ultimate economy and satisfaction of the purchaser OR the ratio between a function for customer
satisfaction and the cost of that function.

Value can be expressed in mathematical way,

Value = [Function (or utility)/cost] = [Worth to you/Price you pay] = ∑Benefits / ∑Costs

Types of values:

Cost Value – It is the cost of manufacturing a product or component or cost of providing a service. It is
the sum of all Direct costs such as raw material cost, labour cost, tool cost to produce the product.
Use Value – It means the basic and required amount of work done, performed or service rendered by a
product. There are certain characteristics of a product which make it useful for certain purposes. Use
value is a measure of properties, qualities and features which make the product to accomplish a use,
work or service.
Esteem Value – Esteem value is features, attractiveness, qualities, fancy, packaging, etc. which basically
increases the sales appeal of the product, or which attracts a person and creates desire to possess the
product.

Exchange Value – A product seems to possess an exchange value if the same can be exchanged for
another product or in case money.
Steps/Phases for Value Analysis:

1. Orientation/Preparation:

• Identify what is to be analysed (product, process or a service)

• After selecting the product and its component, all levels of the production/making must be analysed

2. Functional Identification/Information:

• Identify and prioritise the customers of the selected item

• Prioritizing the customer’s preference (example: a customer’s preference for a specific unique
feature of the product should be more important than the opinion of the senior designer)

3. Analysis/Functional Analysis:
• The functions of the product are analysed by Functional Analysis, which is aimed at identifying
different functions given by a product or part of it. Functions have an importance (weightage) and a cost
to it.
• The costs of these functions are then quantified and this leads to a list of functions ordered by their
importance and value.
• This phase of Value Analysis maybe considered as the key one of the whole methodologies as it
represents the translation of needs to functions.

4. Creative alternatives or Innovation and Creativity:

• For this phase it is necessary to use creative techniques that generate alternatives. Starting from the
analysis of functions and costs, there is a search for means that allow elimination, change or
improvement of components and functions which can eventually reduce costs.

5. Analysis and Evaluation:

• This phase represents a confrontation of ideas, also collect information about the feasibility and cost
of those ideas, and measures the value of the best option among the alternatives present.

• Evaluation is carried out in 2 main steps:

a. Qualitative Analysis of values in design, cost, implementation facilities, etc.

b. Quantitative Analysis using numerical techniques of value measurement that leads to a few
alternatives of high value, which then will be analysed further in detail.
6. Implementation and Monitoring:
• This last phase consists of a report that summarizes the work that has been done, including
conclusions and specific proposals. It will be also necessary to describe action plans for implementation,
in which project management techniques would be useful

• Finally, a plan should be included for monitoring of the actions.

Value Engineering
Value Engineering (Definition):
Value Engineering is a systematic effort to improve the value of a product, project or system and
optimize the life cycle cost in the designing phase itself.
It is a process that identifies opportunities to remove unnecessary cost while assuring that quality,
performance, and other critical factors meet the customer expectations.

Cost of Quality / Quality Costing

Quality costing is a technique by which all the costs related to the delivering of a certain level of quality
are captured and appropriately classified for the purpose of evaluating the quality management efforts
in an organization. It is a management tool used for strategic planning.
With the translation of the quality performance into monetary terms, quality costing captures the
attention of the top management. Furthermore, it enables firms to prioritize various spending
opportunities in the area of quality improvement.

Quality costs in any organization fall under four categories: Prevention, Appraisal, Internal Failures and
External Failure
Prevention Cost – Prevention costs include all costs incurred to prevent, reduce, or eliminate the
occurrence of defects. Costs associated with preventing defects before they happen. Example Costs of
process design, Product and Service design, Employee training, Supplier programs, etc. Expenses
incurred towards training of employees in better methods, vendor development and small group
improvement projects are some of the examples in the category.

As quality increases this cost increases

Appraisal Cost – Appraisal costs pertain to all expenses incurred in ascertaining the quality of a product,
component or a service. Costs incurred in assessing the level of quality. Example - Costs of inspection,
testing

As quality increases this cost decreases.

Internal failure Costs – Internal failures are those that are discovered during the production process. An
appraisal activity may reveal defects and may call for scrapping components altogether or necessitate
rework in several situations. This results in lost productivity and added costs for rectification. All these
costs are classified as internal failure costs Eg: Cost of reworking

As quality increases this cost decreases

External Costs – External failures are those that are discovered after delivery to the customer.All costs
related to rectifying the defects after the product is shipped out of a manufacturer’s premises will be
classified as external failure costs. Eg: warranty, cost of product returns and replacement, on-field
maintenance, and any compensation for the damages incurred. It also includes the cost of lost customer
goodwill.

As quality increases this cost decreases.

Quality costing has several useful purposes. First, by translating quality parameters into monetary terms,
it promotes quality as an important business parameter and helps capture the attention of the top
management of an organization. Quality costs can be used for motivational purposes with regard to
improvement at all levels in the organization. It is often found that many organizations are unclear
about how to improve. In such cases, the use of quality costs could very well provide some direction.
This is so as it enables an organization to set targets and budgets pertaining to quality improvement.

Why to forecast – Understand dynamic and complex environment, managing short term fluctuations,
better materials management, rationalised man power decisions, provide basis for – strategic decisions,
planning and schedule.

Applications – marketing, operations, finance, personnel.

Forecasting is divided into two types –

Quantitative

- Time series analysis

simple moving avg: neither growing or declining.

Simple exponential smoothing – accurate, and easily understandable.

Holfs double exponential smoothing -

Winters triple exponential smoothing

Forecast by linear regression – useful for long term forecasting of family products.

- Causal Analysis

Demand is depended on different variables like price, quality, etc.

Qualitative
- Market research: test or do a survey of the market
- Panel consensus: bring in expert and their views.

- Executive Judgement: Formal inputs/suggestions from execs.

- Historical analogy: find a similar product for new product.

- Delphi method: sequential method of pooling expert opinions

Capacity Planning

Capacity refers to a fixed investment for repetitive use by the system, until it requires replacement on
account of depreciation or wear and tear. Every operating system uses a variety of resources including
labour, machines, tools, and fixtures. All these resources are available in fixed quantities for use by the
system. Capacity denotes, in general, the extent of availability of these resources for use by various
processes.

Capacity planning is a systematic approach to three issues pertaining to capacity:

• estimating the amount of capacity required,

• evaluating alternative methods of augmenting capacity, and

• devising methods to use capacity effectively.

Capacity planning in the short run is confined to making effective use of the available capacity.

A capacity planning exercise is initiated in response to several scenarios that an organization faces from
time to time. However, two of these are more common. The first scenario involves changing market
conditions, leading to an increase in the demand of the products and services that a firm offers. Due to
increased demand, the capacity becomes inadequate and calls for a detailed computation of the new
requirement. Moreover, since capacity additions are done over longer intervals, an estimate of future
capacity projections is an integral part of the exercise. The second context for the capacity planning
exercise is strategic decisions taken with respect to the introduction of new products and new markets.
In this situation, there is a need to revisit the capacity issue.

Step 1:

· ​Forecasting with the help of available techniques in order to estimate the end product or service

offered.

· ​Once the projections for the end-product sales are forecast, detailed capacity computations can be

done at individual facilities in the plant.

· ​On the other hand, the estimation of capacity requirements can also be in response to some

targeted capacity build-up in the factory

Step 2:

· ​The computation of the labour requirements depends on two major factors: the amount of standard
labour hours required per unit of the product and the efficiency of the labour

·​
·​

Step 3:

· ​Once the capacity required is computed, one can estimate how much capacity is already available in

the system

· ​By performing this computation and comparing with the requirements, one can identify the gaps or

excess capacity available for each required resource.

The comparison of the available capacity with the requirement serves several important purposes in a
capacity planning exercise. Some of these are:

1. ​The comparison acts as a basis for the operations manager to understand the consequence of the
capacity expansion initiative.

2. ​It helps to categorize the resources into those with adequate capacity and those with insufficient
capacity and helps to focus on the latter category for problem solving

3. ​It provides an impetus for process-plan changes and improvements for uncovering waste, thereby
leading to the discovery of more capacity at some of the bottlenecks

4. ​It helps the manager to draw out the capital budgeting and investment requirements of the capacity
expansion initiative

Therefore, Capacity planning is important. It has a significant impact on the cost of operation of the
system due to large fixed costs associated with capacity.

Inventory Management:

The term inventory denotes any idle resource that could be put to some future use. the stock of the
product of a company and components thereof that makes up the product. It includes the raw materials,
work in progress and finished goods.
Inventory can be one of the following:
i) An asset, tangible or intangible,
ii) An asset that can be realized for revenue generation or has a value for exchange, or
iii) An asset which is in process but is meant for sale in the market

INVENTORY PLANNING FOR INDEPENDENT DEMAND ITEMS

Independent Demand Items: In manufacturing organizations, finished goods and spare parts typically
belong to the category of independent demand items. It is done to meet customer requirements.
Two attributes characterize and distinguish independent demand items:

i) Continuous demand:
• Example-consumer appliances of manufacturers such as Videocon or LG.
• Constant availability of items and periodic replenishment of stock
• Non-availability of items -> lost sales, poor customer goodwill
ii) Uncertainty of Demand:
• Independent demand items should include some cushion for handling uncertainties whenever they
are significant because of the uncertainty factor
Inventory planning of independent demand items must address 2 Questions:
When (the timing of replenishment. Since demand is continuous and uncertain, the timing of
replenishment is equally crucial)
How much (depending on the requirement, the replenishment could be of a fixed quantity or variable)
Inventory Management is a technique through which stocked goods, inventories, and non-capitalized
assets are kept in a proper manner according to their specific shape and placement.

FUNCTIONS OF INVENTORY
• Decouple components of the operations and distribution
• Uncertainties/variations in demand
• Flexibility in production smoothing
• Economies of scale in purchase and mfg
• To help hedge against price increases
GOALS OF INVENTORY MANAGEMENT
• Maximize customer service (this requires carrying substantial inventory).
• Minimize inventory investment (this requires carrying little inventory).

TYPES OF INVENTORIES
• Raw Materials – The raw material is purchased by any company for its production purpose to
transform it into a finished good.
• Work in progress inventory – refers to the process of transformation of raw material into a finished
product.
• Finished goods – ​these are the complete goods that are now ready to be available for sale.
• Maintenance, repair, operation (MRO) goods ​– items used for support of the production of finished
goods as they will be purchased from the distributor of future resale.
• Vendor inventories
• Non-moving/slow moving stock
• Safety stock: additional investment in inventory to buffer against uncertainties in demand and
supply of raw material and components.
• In-transit inventories
• Service parts/Consumables

INVENTORIES COSTS

Inventory control models should take these into consideration and aim at minimizing the sum of all
these costs. Sometimes, the unit cost of the item for which inventory planning is done is also a relevant
cost for decision making. This is because when large quantities are ordered, there could be some
discount in the unit cost of the item.

1. Inventory-carrying Cost
• Investment in store space and storage and retrieval systems
• Software for maintaining the inventory status
• Managerial and other administrative manpower to discharge various activities related to stores
• Insurance costs
• Cost of obsolescence, pilferage, damages, and wastage
2. Cost of Ordering: Replenishment of cyclic inventory is achieved by ordering material with the
suppliers. Includes cost while:
• search and identification of appropriate sources of supply
• price negotiation, contracting and purchase-order generation, follow-up and receipt of material
• eventual stocking in the stores after necessary accounting and verification
The cost of carrying and the cost of ordering are fundamentally two opposing cost structures in
inventory planning.

3. Cost of Shortages
• additional costs arising out of pushing the order back
• rescheduling the production system to accommodate these changes
• Rush purchases, uneven utilization of available resources, and lower capacity utilization

CYCLIC INVENTORY ORDER

EOQ MODEL (Economic Order Quantity)

Assumptions/Drawbacks:
a) The demand is known with certainty and is continuous over time.
b) There is an instantaneous replenishment of items
c) The items are sourced from an external supplier.
d) There are no restrictions on the quantity that we can order.
e) There are no preferred order quantities for the items.
f) No price discount is offered when the order size is large.

A larger order quantity Q will require fewer orders to meet a known demand D, and vice versa. The
relationship between Q and the total cost of ordering is graphically shown. The number of orders to be
placed to satisfy a demand of D = D/Q. If C0 denotes the cost of ordering per order, then:

Total ordering cost = (D/ Q )× C

What does economic order quantity mean?

Economic order quantity is a technique used in inventory management. It refers to the optimal amount
of inventory a company should purchase in order to meet its demand while minimizing its holding
and storage costs. The economic order quantity is just one of many formulas used to help
companies make more efficient inventory management decisions. One of the important limitations
of the economic order quantity is that it assumes the demand for the company’s products is
constant over time.

Formula and Calculation of Economic Order Quantity (EOQ)

The formula for EOQ is:

Q= √2DO/H

where:

Q=EOQ units

D=Demand in units (typically on an annual basis)

O=Order cost (per purchase order)

H=Holding costs (per unit, per year)

Why is economic order quantity important?

Economic order quantity is important because it helps companies manage their inventory efficiently.
Without inventory management techniques such as this, companies will tend to hold too much
inventory during periods of low demand, while also holding too little inventory in periods of high
demand. Either problem creates missed opportunities for companies: too much inventory generally
means too little cash on hand, while not holding enough inventory will lead to missed sales. For
investors, calculating the economic order quantity for a company can help to assess how efficiently
that company is managing its inventory.

What the Economic Order Quantity Can Tell You?

The goal of the EOQ formula is to identify the optimal number of product units to order. If achieved, a
company can minimize its costs for buying, delivery, and storing units. The EOQ formula can be
modified to determine different production levels or order intervals, and corporations with large
supply chains and high variable costs use an algorithm in their computer software to determine
EOQ.

EOQ is an important cash flow tool. The formula can help a company control the amount of cash tied up
in the inventory balance. For many companies, inventory is its largest asset other than its human
resources, and these businesses must carry sufficient inventory to meet the needs of customers. If
EOQ can help minimize the level of inventory, the cash savings can be used for some other business
purpose or investment.

The EOQ formula determines a company's inventory reorder point. When inventory falls to a certain
level, the EOQ formula, if applied to business processes, triggers the need to place an order for more
units. By determining a reorder point, the business avoids running out of inventory and can continue
to fill customer orders. If the company runs out of inventory, there is a shortage cost, which is the
revenue lost because the company has insufficient inventory to fill an order. An inventory shortage
may also mean the company loses the customer or the client will order less in the future.

Example of How to Use EOQ

EOQ takes into account the timing of reordering, the cost incurred to place an order, and the cost to
store merchandise. If a company is constantly placing small orders to maintain a specific inventory
level, the ordering costs are higher, and there is a need for additional storage space.

Assume, for example, a retail clothing shop carries a line of men’s jeans, and the shop sells 1,000 pairs of
jeans each year. It costs the company $5 per year to hold a pair of jeans in inventory, and the fixed
cost to place an order is $2.

The EOQ formula is the square root of (2 x 1,000 pairs x $2 order cost) / ($5 holding cost) or 28.3 with
rounding. The ideal order size to minimize costs and meet customer demand is slightly more than 28
pairs of jeans. A more complex portion of the EOQ formula provides the reorder point.
Limitations of Using EOQ

The EOQ formula assumes that consumer demand is constant. The calculation also assumes that both
ordering and holding costs remain constant. This fact makes it difficult or impossible for the formula
to account for business events such as changing consumer demand, seasonal changes in inventory
costs, lost sales revenue due to inventory shortages, or purchase discounts a company might realize
for buying inventory in larger quantities

INVENTORY CONTROL SYSTEM

1. Continuous review (Q) OR Fixed order quantity model OR Two-bin system

• An order is placed with a supplier for a predetermined quantity, Q, and until the material arrives in
the stores, the smaller bin is consumed.
• During replenishment, the smaller bin is filled in first and the cycle continues
• Less responsive to change in demand
• The “when” decision in a Q system is answered by reorder point.
• Difficulty of ordering of multiple items from same supplier
Reorder = Expected demand + Safety point during lead time stock

2. The Periodic Review (P) System OR Fixed time period model OR One bin

• The inventory level in the system is reviewed at fixed intervals of time

• At the time of review, an order is placed to replenish the inventory to a predetermined level, S. The
parameter S, known as the order up to level, dictates the order quantity.
• The review period R determines when to order
• The order up to level S determines how much to order.
CHAPTER 9.4 LAYOUT PLANNING
Layout planning in manufacturing and service organizations involves the physical arrangement
of various resources available in the system to improve the performance of the operating
system, thereby providing better customer service

Layout planning provides a set of tools and techniques that help decide where to locate
resources and also to assess the impact of the alternative choices one may have for locating the
resources.

A good layout design > jobs in a manufacturing system will have to travel shorter distances

Absence of a good layout longer distances > more time is needed to complete the process >
leads to both increase in material handling costs and poor quality.

4 Major Types of Layouts are 1) Process Layout 2) Product Layout 3) Group

Technology Layout 4) Fixed Position Layout

Process Layout

A process or a functional layout is an arrangement of resources on the basis of the process

characteristics of the resources. Consider a machine shop consisting of lathes (L), grinders (G),
milling machines (M), and drilling machines (D). A sample process layout for this shop is shown
below. Each department in a process layout is typically organized into functional groups ie. All
lathes in one department and similarly millers, grinders and drillers.
In the above layout, components belonging to Product A first visit a lathe, then a drilling
machine, a milling machine, and finally a grinding machine. Product B and C follow a different
sequence.

Advantages of Process Layout

-​ ​greater flexibility and better utilization of resources

Disadvantages of Process Layout

-​ Enormous criss-crossing of the jobs, resulting in poor visibility of flow of jobs. This makes
​

progress chasing a difficult task.

-​ Heavy load on material handling, leading to bottleneck situations in the material-handling

​

system.

-​ Difficulty in production planning, scheduling, and control of the jobs.

​

-​ ​ Very high throughput times, which in turn increases the investments in stocks, stock
holding costs, damages, and material obsolescence.

-​ Poor delegation of work and poor accountability.

​

-​ Low motivation and low job satisfaction for the workforce

​

Product Layout

In product layout the order in which the resources are placed exactly follows the process
sequence dictated by a product.
Consider a machine shop consisting of lathes (L), grinders (G), milling machines (M), and drilling
machines (D). Components belonging to Product A first visit a lathe, then a drilling machine, a
milling machine, and finally a grinding machine. That is L > D > M > G.

For Product B let’s say its L > D > L > G and for Product C its L > D > M > L > G.

For the above routing information the product layout will be as shown in Figure below.

Advantages of Product Layout

-​ In a product layout, the required set of resources for every product is dedicated.
​

-​ ​ Due to this, the resources are arranged in the order of the machining requirements
resulting in smooth component flow in the shop.

-​ Since each product will have its own set of resources, material handling is simpler and it
​

is possible to invest in fixed-path material-handling systems to speed up material

transfer between successive workstations.

-​ T​ he production control issues are much simpler in a product type of layout compared to
the process layout.

For Disadvantages check table below

ADVANTAGES AND DISADVANTAGES OF PRODUCT & PROCESS LAYOUTS

Group Technology
GT is a philosophy that seeks to exploit commonality in manufacturing and uses this as the basis for
grouping components and resources.

The implementation of GT is often known as cellular manufacturing. In cellular manufacturing, the

available components are grouped into ​part families​.

An appropriate measure for manufacturing similarity is used to identify part families. Families can be
grouped based on parts on which similar operations are to be performed; like parts supposed to go
through same manufacturing process or design process can be grouped together.

Corresponding to each part family, machine groups are identified and the layout is formed accordingly.
An example of a group technology layout for the process layout is shown in figure below.

Advantages of GT

-​ GT promotes standardization of tooling fixturing and setups

​

-​ Material handling is reduced because parts are moved within a machine cell rather than
​

within the entire factory

-​ Process planning and production scheduling are simplified

​

-​ Setup times are reduced leading to low manufacturing lead times

​

Fixed Position Layout

Fixed position layout is appropriate when the product manufactured is very bulky, difficult to move and
is often made in quantities of one. Typical examples include building very large machine tools and
equipment, ship and aircraft building, and preventive and breakdown maintenance of such large
systems. In such a layout tools, workers and other resources are brought to the project. The orientation
of the equipment will dictate the placement of specific resources required for the process.

Advantages of Fixed Position Layout

-​ Plant Layout is highly flexible and can accommodate changes in product design, product
​

mix and product volume.

-​ Material movement is low

​

Disadvantages of Fixed Position Layout

-​ Movement of equipment take more time so time of project completion can also
​

increase

-​ Requires close control and co-ordination in production scheduling

​

-​ Layout changes with change in product. Eg. Diff layout for ship building, diff layout for
​

aircraft building etc

-​ Process times for manufacturing is high

​

DESIGN OF PROCESS LAYOUTS

Step I—Identify the number of departments required:

Since process layouts are made on the basis of functional similarity of the resources, machines
can be grouped together as per function. For example, in a machine shop, all the lathes are
grouped together to form a lathe shop, all the grinders are grouped to form the grinder shop,
and so on.

it is possible to also estimate the sizes of each of these departments and the distance between
the blocks in the shop floor in which the departments are to be located.

On the basis of these estimates, the required data for the layout problem could be gathered.

Step II—Estimate the magnitude of flow:

The second step in the design process is to estimate the flow of material between departments
and the cost of moving one unit across departments. In a process-focused layout, jobs visit
various departments before the processing is complete.

Therefore, consolidating all this information will indicate not only the load on each resource but
also the quantum of interdepartmental flow.

Interdepartmental flow is the sum of flows between two departments irrespective of the
direction of the flow. For instance, an interdepartmental flow of 100 units between
Departments 1 and 2 may include 65 units of flow from Department 1 to Department 2 and 35
units of flow from Department 2 to Department 1.
Step III—Arrive at the final layout of the departments:

Once the basic data is available, appropriate methods could be used to solve the layout
problem such as qualitative and quantitative approaches.

THE QUALITATIVE APPROACH TO LAYOUT DESIGN

In this approach, some qualitative measures are used to decide which department is to be
located next to another department. One simple method is to use the interdepartmental flow
as the basis on which closeness between one department and another could be established.
Departments with high interdepartmental flow can be placed close and vice versa.

However, often it is difficult to exactly quantify why two departments need to be close to each
other or should not be located side-by-side. For example, two departments whose inter
departmental flow is high should still not be located closely if their processes might affect each
other due to physical closeness and result into damage of the product or it can even cause
accidents.

Based on such criteria, it is possible to arrive at qualitative measures for closeness

requirements of a department vis-à-vis other departments. The qualitative measures link some
criteria to the closeness required between a pair of departments. Figure below shows one of
the popular methods used for qualitative ranking of closeness and an example of ranking for
locating the six departments.

Using the closeness ratings between departments, layouts can be constructed. In the above
example, Departments 1 and 3 are to be located close to each other. Similarly, Departments 1
and 6 should also be close to each other. Using this information, an initial layout can be
constructed. Accommodating all the requirements may often turn out to be infeasible.
However, alternative combinations may ensure better locations that improve the
appropriateness of the layout. Therefore, one method is to begin with an initial layout that is
feasible and progressively check the appropriateness of the new layout obtained.

Smaller layouts can be analysed using visual methods and by trial and error. However, if the
number of departments involved is many, then software packages like ALDEP and CORELAP
may be used for layout design.
Design of Product Layouts

Take a product which is mass produced, say, laptops. At one end of the assembly line
components will be fed into the system in multiple stations and the computer will be
progressively assembled. Initially the mother board will be assembled and as it proceeds, the
hard disk, optical drives, fans, etc. will be added to the box before it is finally secured with the
cover plate.

A product layout design essentially caters to this objective by estimating the exact number and
the sequence of resources required in the manufacturing system for a targeted production
level. Essentially, the layout design seeks to identify the minimum number of resources
required to meet a targeted production rate and the order in which these resources are to be
arranged. In the process it seeks to establish a balance among the resources so that production
is smooth. Therefore, the technique employed for this purpose is known as the line-balancing
technique.

Line balancing​ is a method by which the tasks are optimally combined without violating
precedence constraints and a certain number of workstations are designed to complete the
tasks.

If there are three workstations, A, B, and C, in which 7 tasks are performed in a manufacturing
system, then the workstation times are nothing but the summation of the task times assigned
to each workstation.

Let the workstation times be denoted as WA, WB and WC . Clearly, a balanced design is one in
which the workstation times ​do not vary widely​. In such a situation, the resources will be
uniformly utilized and the flow of material will be even. Further, there will be a good rhythm in
operations. The maximum of the three workstation times determines the interval between the
productions of two successive components. If WA = 5 seconds, WB = 3 seconds and WC = 7
seconds, one component will come out of the system every 7 seconds. This measure is known
as the cycle time.

Cycle time could be considered as the reciprocal of production rate. If in a period of 20,000
seconds a shop produced 10,000 pieces of a component, the cycle time is 2 seconds. Cycle time
could be actual or desired. If we compute on the basis of actual production, it represents the
actual cycle time. On the other hand, if we compute the cycle time on the basis of what we
desire the production to be, then it is desired cycle time. Maintaining the desired cycle time
requires better management and work practices.

The problem of designing a balanced set of workstations suffers from the classical trade-off
issue. If we combine more tasks into fewer workstations, we may require fewer workstations
but the cycle time will be high, leading to reduced production rate. At the other extreme, if the
tasks are kept separate and as many workstations are designed, we may increase the
production rate beyond what is required at the risk of deploying more resources and workers
with poor utilization.
Design of Group Technology Layouts
GT layouts are designed with the objective of subdividing a universe of machines and components into
sub-groups such that each sub-group of components forms a part family and is endowed with a
corresponding sub-group of machines known as a machine group. GT layout design is done with the
systematic analysis of a machine-component incident matrix.

Consider an example of 20 components requiring processing in 10 machines. Let us denote the

components using numbers and the machines using alphabets. A machine-component incident matrix
(MCIM) indicates the relationship between the components and machines using a binary representation.
Figure below has the MCIM for our hypothetical example.

In a GT layout design, the MCIM is analysed to detect possible sub-groups. If the sub-groups are
non-overlapping, then the resulting design has independent resources and components. Each sub-group
is also referred to as a cell. Therefore, the resultant structure obtained by reconfiguring a manufacturing
system with a GT layout is known as a ​cellular manufacturing system​. Methods of identifying cells from
the basic MCIM involve using a matrix manipulation or other methods to rearrange the rows and
columns to obtain sub-groups.

Many methods are available for identifying an appropriate set of sub-groups, the most popular among
these is the production flow analysis (PFA) proposed by Burbidge. Using these methods we can arrive at
the part families relevant for different machine groups and plan the layout accordingly.
Just In Time

A lean operation is a flexible system of operation that uses considerably fewer resources (i.e.,
activities, people, inventory, and floor space) than a traditional system. Moreover, lean systems
tend to achieve greater productivity, lower costs, shorter cycle times, and higher quality than
non-lean systems.

Lean systems are sometimes referred to as just-in-time (JIT) systems.

Just-in-time (JIT) A highly coordinated processing system in which goods move through the
system, and services are performed, just as they are needed.

Just-in-time' is a management philosophy and not a technique.

JIT is called philosophy because it goes beyond inventory control and encompasses the entire
system of production

JIT is an approach that seeks to eliminate all sources of waste in production activities by
providing the right part at the right place and at the right time

Three fundamental concepts of JIT

1. Waste elimination
2. Pull vs Push Systems
3. Manufacturing cycle time (Throughput time)

It originally referred to the production of goods to meet customer demand exactly, in time,
quality and quantity, whether the `customer' is the final purchaser of the product or another
process further along the production line.

It has now come to mean producing with minimum waste. "Waste" is taken in its most general
sense and includes time and resources as well as materials.

Eliminating waste.

Waste represents unproductive resources; eliminating waste can free up resources and
enhance production. Inventory is an idle resource, taking up space and adding cost to the
system. It should be minimized as much as possible. In the lean philosophy, there are eight
Wastes:

1. Excess inventory —beyond minimal quantities, an idle resource takes up floor space
and adds to cost.
2. Overproduction —involves excessive use of manufacturing resources.
3. Waiting time —requires space, adds no value.
4. Unnecessary transporting —increases handling, increases work-in-process inventory.
5. Processing waste —makes unnecessary production steps, scrap.
6. Inefficient work methods —reduce productivity, increase scrap, increase work-inprocess
inventory.
7. Product defects —require rework costs and possible lost sales due to customer
dissatisfaction.
8. Underused people—relates to mental and creative abilities as well as physical abilities.

Elements of JIT include:

Continuous improvement.

Attacking fundamental problems - anything that does not add value to the product.

Striving for simplicity - simpler systems may be easier to understand, easier to manage and less
likely to go wrong.

Quality control at source - each worker is responsible for the quality of their own output.

Poka-yoke - `mistake-proof' tools, methods, jigs, etc. prevent mistakes

Preventative maintenance, Total productive maintenance - ensuring machinery and equipment

functions perfectly when it is required, and continually improving it.

Good housekeeping - workplace cleanliness and organization.

Set-up time reduction - increases flexibility and allows smaller batches. The ideal batch size is
1item.
Multi-process handling - a multi-skilled workforce has greater productivity, flexibility, and job
satisfaction.
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Kanbans - simple tools to `pull' products and components through the process.

Jidoka (Autonomation) - providing machines with the autonomous capability to use judgement,
so workers can do more useful things than standing watching them work.

Andon (trouble lights) - to signal problems to initiate corrective action.

- JIT systems have an unambiguous definition of what constitutes waste in the
system.

- The philosophy of Just in Time system is one of continuous waste elimination.

- Contrary to the traditional thinking, the inventory in a JIT system is deliberately

removed to expose hidden problems.

- These problems are solved resulting in fewer inventory and waste in the system
and greater productivity.

- Implementation of JIT requires that the manufacturing architecture is converted

into a chain of internal customers.

- Lot size reduction and use of standard containers are other elements of a JIT
system.

- Production Planning and control in JIT systems is achieved through the use of
Kanban

- Kanban enables waste elimination from the system by preventing overproduction

and exposing problems in processes.

- JIT systems utilise a Pull type scheduling

- Pull type scheduling are very effective in providing visible control of the
processes and bringing the problems to the surface rapidly.
The Toyota Approach

Toyota’s approach came to be known as the Toyota Production System (TPS), and it has
served as a model for many implementations of lean systems, particularly in manufacturing.

1. Muda : Waste and inefficiency. Perhaps the driving philosophy. Waste and inefficiency
can be minimized by using the following tactics.
2. Kanban : A manual system used for controlling the movement of parts and materials
that responds to signals of the need (i.e., demand) for delivery of parts or materials.
This applies both to delivery to the factory and delivery to each workstation. The result
is the delivery of a steady stream of containers of parts throughout the workday. Each
container holds a small supply of parts or materials. New containers are delivered to
replace empty containers.
3. Heijunka : Variations in production volume lead to waste. The workload must be
leveled; volume and variety must be averaged to achieve a steady flow of work.
4. Kaizen : Continuous improvement of the system. There is always room for
improvement, so this effort must be ongoing.
5. Jidoka : Quality at the source. A machine automatically stops when it detects a bad part.
A worker then stops the line. Also known as autonomation.