UNIT-1 OM

CLASS: T.Y. BBA (GENERAL/ITM) SEM-6

SUBJECT: OPERATION MANAGEMENT
FACULTY: LATA VED
UNIT- 1
UM06CBBI25 OPERATIONS MANAGEMENT

 OUTLINE OF THE UNIT

 Fundamentals of Operations Management
 Operating System and operation management:
 Meaning of operating system;
 functions of manufacturing and operations (Transport, supply and service)
 Meaning, scope and importance of operations management
 Role and responsibility of operations managers in modern business
environment.

What is Operations Management (OM)?

 Operations management focuses on carefully managing the processes to
produce and distribute products and services. A great deal of focus is on
efficiency and effectiveness of processes. Therefore, operations management
often includes substantial measurement and analysis of internal processes.
 Ultimately, the nature of how operations management is carried out in an
organization depends very much on the nature of the products or services in
the organization, for example, agriculture, mining, construction or general
services. Here are some additional perspectives on the field.
 "Operations management is chiefly concerned with planning, organizing and
supervising in the contexts of production, manufacturing or the provision of
services."
 "Operations management is an area of management concerned with designing
and controlling the process of production and redesigning business
operations in the production of goods or services."
 Concept of Operations
An operation is defined in terms of the mission it serves for the organization,
technology it employs and the human and managerial processes it involves.
Operations in an organization can be categorized into manufacturing
operations and service operations. Manufacturing operations is a conversion
process that includes manufacturing yields a tangible output: a product,
whereas, a conversion process that includes service yields an intangible
output: a deed, a performance, an effort.

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 Distinction between Manufacturing Operations and Service Operations

Following characteristics can be considered for distinguishing manufacturing
operations with service operations:
 Tangible/Intangible nature of output
 Consumption of output
 Nature of work (job)
 Degree of customer contact
 Customer participation in conversion
 Measurement of performance.
 Manufacturing is characterized by tangible outputs (products), outputs that
customers consume overtime, jobs that use less labor and more equipment,
little customer contact, no customer participation in the conversion process (in
production), and sophisticated methods for measuring production activities
and resource consumption as product are made.
 Service is characterized by intangible outputs, outputs that customers
consumes immediately, jobs that use more labor and less equipment, direct
consumer contact, frequent customer participation in the conversion process,
and elementary methods for measuring conversion activities and resource
consumption. Some services are equipment based namely rail-road services,
telephone services and some are people based namely tax consultant services,
hair styling.
What Is Operations Management?

 Operations management is the administration of business practices to create

the highest level of efficiency possible within an organization. It is concerned
with converting materials and labor into goods and services as efficiently as
possible to maximize the profit of an organization. Operations management
teams attempt to balance costs with revenue to achieve the highest
net operating profit possible

Introduction of Production management-

 It becomes the acceptable term from 1930s to 1950s.

 Production is the centre of all activities of an organization. This is to say all
the activities of an organization, such as: Finance, Personnel, Marketing...etc.,
is exists in an organization because of production activity. Hence the position
of Production Management in an organization is very important.
 As F.W.Taylor’s works becomes more widely known, managers developed
techniques that focused on economic efficiency in manufacturing.

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 Workers were studied in great details to eliminate wasteful efforts & achieve
greater efficiency.
 At the same time, psychologist, socialist & other social scientists began to
study people & human behaviour in the working environment.
 In addition, economists, mathematicians, & computer socialists contributed
newer, more sophisticated analytical approaches.
 With the 1970s emerge two distinct changes in our views.
 The most obvious of these, reflected in the new name “operation
management”

 Introduction of Operation management-

 Till the early 1970s, the term ‘Production Management’ was used but an
important change emerged during the 1970s which was reflected in the new
name – “Operations Management” which incorporated both production and
service related concepts and procedures.
 As the service sector has become more prominent, the change from
‘production’ to ‘operations’ indicates the development of the field to service
organization.
 It was shift in the service & manufacturing sectors of the economy.
 As service sector become prominent, the change from “production” to
“operation” emphasized the broadening of our field to service organizations.
 The second, more suitable change was the beginning of an emphasis, rather
than just analysis, in management practices.

 OPERATION MANAGEMENT:
 Production/Operations management is the process, which combines and
transforms various resources used in the production/operations subsystem of
the organization into value added product/services in a controlled manner as
per the organization.
 Therefore, it is that part of an organization, which is concerned with the
transformation of a range of inputs into the required having the requisite
quality level.
 The set of interrelated management activities, which are involved in
manufacturing certain products, is called as production management.
 If the same concept is extended to services management, then the
corresponding set of management activities is called as operations
management.
 In normal sense the term operation means the commercial activity which
includes both types of business i.e., manufacturing as well as services.
 Operations Management is the conversion of inputs into output, using
physical resources, so as to provide the desired utility/utilities of form, place,

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possession or state or a combination there-off to the customer while meeting
the other organizational objectives of effectiveness, efficiency and
adaptability.
 It distinguishes itself from other functions such as personnel, marketing, etc.
 By its primary concern for ‘conversion by using physical resources’.
 There should be a number of situations in either marketing or personal or
other functions, which can be classified or sub-classified under Production
and Operations Management.
 For example, a) the physical distribution of items to the users or customers, b)
the arrangement of collection of marketing information, c) the actual selection
and recruitment process, d) The paper flow and conversion of data into
information usable by the judge in a court of law, etc.
 Production and Operations Management systems are also described as
providing physical goods or services.
 When we say that the Central Government provides service and the Indian
Airlines provide service these are two entirely two different classes of utilities
and consequently the objective and criteria for reference will have to be
entirely different for these two cases.
 We may say that the actual production and operations management systems
are quite different.
 Operations Management complex involving multiple utilities to be provided
to the customer, with a mix of physical and non-physical inputs and outputs
and perhaps with a multiplicity of customers.

 Definitions of Production/Operations Management-

 POM is concerned with that process which converts inputs into outputs. The
inputs are various resources like raw materials, men, machines technology
etc. The outputs are goods & services.
 Production Management: Deals with decision making related to production
process so that resulting goods or services are produced according to
specifications in amount & by schedules demanded & at minimum cost.
 Operations management is that activity where by resources are combined and
transformed in a controlled manner to add value in accordance with policies
communicated by management.
 POM is multidisciplinary approach which integrates the knowledge of
science, technology, engineering & management to convert I/P into O/P’s.

 OPERATIONS MANAGEMENT-
 CONCEPT & MEANING:
 Scientifically, operation management is known as process of changing inputs
too output by adding certain value to finish product.

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 As to deliver value for customers in products and services, it is essential for

the company to do the following:

 Alterations: Identify the customer needs and convert than into a specific
product or service based on product requirement do backward working to
identify raw material requirements.
 Transportation: Engage internal and external vendors to create supply chain
for raw material and finished goods between vendor→ production facility→
customers.
 Storage: refers to the process of keeping entity in a protected environment.
 Inspection: refers to the process of verification of entity and thereby taking
decision on purchase, repairs, etc.

 OPERATING SYSTEM:
 The production system of an organization is that part, which produces
products of an organization.
 It is that activity whereby resources, flowing within a defined system, are
combined and transformed in a controlled manner to add value in accordance
with the policies communicated by management.
 The production system has the following characteristics:
1. Production is an organized activity, so every production system has an
objective.
2. The system transforms the various inputs to useful outputs.
3. It does not operate in isolation from the other organization system.
4. There exists a feedback about the activities, which is essential to control
and improve system performance.
 Operating system converts inputs in order to provide outputs which are
required by a customer.
 It converts physical resources into outputs, the function of which is to satisfy
customer wants, i.e., to provide some utility for the customer.
 In some of the organization the product is a physical good (hotels) while in
other it is a service (hospitals).
 Bus and taxi services, tailors, hospital and builders are the examples of an
operating system.
 E.Adam & Ronald j. Ebert defines operating system as, ‘an operating system
if an organisation is the part of an organisation that produces the
organisation’s physical goods & services.’
 Ray Wild defines as ‘an operating system is a configuration of resources
combined for the provision of goods or services.
 The important activities among these are discussed briefly:

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INPUT:

1. Planning:
 This involves forecasting identification of alternatives and preparation of
corporate plant.
 The common managerial aids used are forecasting models, decision tree,
games theory economic evaluation and use of computers.
 Linear prog, Simplex method etc.
2. Materials:
 This involves effective material management organization to create conditions
to generate adequate motivation and to design necessary render rating etc,
and developing schemes.
 It also involves render rating etc, and development schemes.
 It also involves functions such as inventory control purchasing and
storekeeping.
3. Labour/Manpower:
 This involves recruitment and training and their retention through adequate
motivation involving proper merit rating realistic wages & effective
administration.
4. Machinery/Equipment:
 The main consideration here is the proper selection of machinery in order to
have cost effective capital investment.
 Some of the methods employed are cost benefit analysis.
 Be analysis economic evaluation and replacement analysis.
5. Capital/Money:
 Several managerial tools are available to carry out economic evaluation of an
investment.
 Some of those are- DCF, NPV pay back portfolio management, capital
rationing return on investment analysis profitability index risk analysis
leverage analysis, cost benefit analysis and technology.
6. Technology:
 This important input involves acquisition adaption and improvement of
technology.
 The R&D and engineering division of an organization are also directly
involved in this.
 The techniques used are technology forecasting and product life cycle
analysis.
 Its importance has given rise to the development of a separate discipline
called management of technology.
7. Time:

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 This is another important input to operation management.

 Time of delivery, operating time, cycle time, slack time, allowed time and rest
time are important parameters.
8. Organisation:
 This has a direct impact on the efficiency of the processor and hence the
output because the philosophy and structure of an organisation influence the
working environment.
 Authority relationship shop floor ethos philosophy and working culture of
the unit.
9. Government Information:
 The activities of an enterprise and its outputs are directly influenced by the
government policies stipulated by various acts and rules.
 It is also influence by policies, political, philosophy and expectation of
government in power.
 This in turn interest and moulds public opinion and social environment of the
enterprise.

CONVERSION OR PROCESS:
1. Product mix:
 The primary concern the processor is the product mix.
 Decision on product mix is influenced by the market potential infrastructure
availability and competition.
 The next step is the optimum capacity utilization of the product mix.
 The managerial tools generally used in the field are market research, make or
buy decisions, brain storming and analysis or techniques like LP and
computer application.
2. Plant:
 The conversion of resources into product takes place in a plant.
 The important factor there are plant location, building and services, plant
layout and plant facilities like CAD/CAM manual, semi-automatic or fully
automatic facilities, plant maintenance, house-keeping and safety.
3. Material Handling Equipment:
 Selection layout accounting and replacement are some of the activities which
come under this head.
4. Labour cost:
 Here two aspects are important viz., number of workers and cost of labour.
 Method study work measurement, incentives and training are some of the
managerial techniques used here.
5. Production cost:

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 Production cost depends on the cost of production and overhead cost of

production depends on the production technology, production cycle and
delivery terms.
 Overhead depends upon many factors like fixed cost, supervision and other
infrastructure.
6. Material cost:
 This is the major factor in production.
 It is estimated that 60% of the cost of production is due to the cost of material.
 The sources of supplier substitution, vendor selection and development
indigenization, standardization etc are some of the major activities here.

OUTPUT:
 Output in the form of production or services is the ultimate objective of an
industrial enterprise.
 The survival and success of an enterprise depends upon it.
 Some factor which influence output are:
1. Price: This depends upon many aspect including technical efficiency and
economic efficiency of operation.
2. Delivery
3. Quality
4. Profitability

FEEDBACK ANALYSIS:
 It is essential to ensure that the actual confront with the planned output more
often than not.
 These two differ.
 It may be owing to three factors viz., objectives, constraints and criteria of
movement.
 Information about the difference between the desired output and the actual
output are feedback to the management for taking corrective measures.
 The common techniques applied for this are management information system
special reports milestones, charts and PERT/CPM charts.

 Scope of Production/operation Management:

 Production and Operations Management concern with the conversion of
inputs into outputs, using physical resources, so as to provide the desired
utilities to the customer while meeting the other organizational objectives of
effectiveness, efficiency and adoptability.
 It distinguishes itself from other functions such as personnel, marketing,
finance, etc., by its primary concern for ‘conversion by using physical
resources.’

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 Following are the activities which are listed under production and operations
management functions:
1. Location of facilities
2. Plant Layout & material handling
3. Product design
4. Process design
5. Production and planning control
6. Quality control
7. Material management
8. Maintenance management
location
of
facilities
plant
maintenance layout &
management material
handling

materials production/operati product

management on management
design

quality process
control design
production
& planning
control

1. Location of Facilities:
 Location of facilities for operations is a long-term capacity decision which
involves a long term commitment about the geographically static factors that
affect a business organization.
 It is an important strategic level decision-making for an organization.
 It deals with the questions such as ‘where our main operations should be
based?’
 The selection of location is a key-decision as large investment is made in
building plant and machinery.
 An improper location of plant may lead to waste of all the investments made
in plant and machinery equipments.
 Hence, location of plant should be based on the company’s expansion plan
and policy, diversification plan for the products, changing sources of raw
materials and many other factors.

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 The purpose of the location study is to find the optimal location that will
results in the greatest advantage to the organization.

2. Plant Layout & Material Handling:

 Plant Layout refers to the physical arrangement of facilities.
 It is the configuration of departments, work centres and equipment in the
conversion process.
 The overall objective of the plant layout is to design a physical arrangement
that meets the required output quality and quantity most economically.
 According to James Moore, “Plant layout is a plan of an optimum
arrangement of facilities including personnel, operating equipment, storage
space, material handling equipment and all other supporting services along
with the design of best structure to contain all these facilities”.
 ‘Material Handling’ refers to the ‘moving of materials from store room to the
machine and from one machine to next during the process of manufacture’.
 It is also defined as the ‘art and science of moving, packing and storing of
products in any form’.
 It is a specialized activity for a modern manufacturing concern, with 50 to
75% of the cost of production.
 This cost can be proper selection, operation and maintenance of material
handling devices.
 Material handling devices increases the output, improves quality, speeds up
the deliveries and decreases the cost of production.
 Hence, material handling is a prime consideration in the designing new plant
and several existing plants.

3. Product design:
 It deals with conversion of ideas into reality.
 Every business organisation has to design, develop, & introduce new
products as a survival & growth strategy.
 Developing the new products & launching them in the market is the biggest
challenge faced by the organisations.
 The entire process of need identification to physical manufacture of product
involves 3 functions: marketing, product, development & manufacturing.
 Product development translates the need of customers given by marketing
into technical specification & designing the various features into the product
to these specifications.
 Manufacturing has the responsibility of selecting the processes by which the
product can be manufactured.
 Product design & development provides link between marketing customer
needs & expectations & the activities required to manufacture the products.

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4. Process Design:
 Process design is a microscopic decision-making of an overall process route
for converting the raw material into finished goods.
 These decisions encompass the selection of a process, choice of design are to
analyse the workflow for converting raw material into finished product and
to select the workstation for each included in the workflow.

5. Production Planning & Control:

 Production planning and control can be defined as the process of planning the
production in advance, setting the exact route of each item, fixing the starting
and finishing dates for each item, to give production orders to shops and to
follow up the process and control lies in the statement ‘First Plan Your Work
and then Work on Your Plan’.
 Main function of production planning and control includes planning, routing,
scheduling, dispatching and follow-up.
 Planning is deciding in advance what to do, how to do it and who is to do it.
 Planning bridges the gap from where we are, to where we want to go.
 It makes it possible for things to occur which would not otherwise happen.
 Routing may be defined as the selection of path which each part of the
product will follow, which being transformed from raw material to finished
products.
 Routing determines the most advantageous path to be followed from
department to department and machine to machine till raw material gets its
final shape.
 Scheduling determines the programme for the operations.
 Scheduling may be defined as ‘the fixation of time and date for each
operation’ as well as it determines the sequence of operations to be followed.
 Dispatching is concerned with the starting the processes.
 It gives necessary authority so as to start a particular work, which has already
been planned under ‘Routing’ and ‘Scheduling’.
 Therefore, dispatching is ‘release of orders and instruction for the starting of
production for any item in acceptance with route sheet and schedule charts.’
 The function of follow-up is to report daily the progress of work in each shop
in a prescribed pro-forma and to investigate the causes of deviation from the
planned performance.

6. Quality Control:
 Quality Control (QC) may be defined as ‘a system that is used to maintain a
desired level of quality in a product and services’.

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 It is a systematic control of various factors that affect the quality of the

product.
 Quality control aims at prevention of defects at source, relies on effective
feedback system and corrective action procedure.
 Quality control can also be defined as ‘that industrial management
techniques by means of which ensures of uniform acceptable quality is
manufactured’.
 It is the entire collection of activities which ensures that the operation will
produce the optimum quality products at minimum cost.
 The main objective of quality control are:
1. To improve the companies income by making the production more
acceptable to the customers i.e., by providing long life, greater usefulness,
maintainability, etc.
2. To reduce companies cost through reduction of losses due to defects.
3. To achieve interchange ability of manufacture in large scale production.
4. To produce optimal quality at reduced price.
5. To ensure satisfaction of customers with production or services or high
quality level, to build customer goodwill, confidence and reputation of
manufacturer.
6. To make inspection prompt to ensure quality control.
7. To check the variation during manufacturing.

7. Material Management:
 Material management is that aspect of management function which is
primarily concerned with the acquisition, control and use of materials needed
and flow of goods and services connected with the production process having
some predetermined objectives in view.
 The main objectives of materials management are:
1. To minimize material cost.
2. To purchase, receive, transport and store materials efficiently and to
reduce the related cost.
3. To cut down costs through simplification, standardization, value analysis,
import substitution, etc.
4. To trace new sources of supply and to develop cordial relations with them
in order to ensure continuous supply at reasonable rates.
5. To reduce investment tied in the inventories for use in other productive
purposes and to develop high inventory turnover ratios.

8. Maintenance Management:
 In modern industry, equipment and machinery are a very important part of
the total productive effort.

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 Therefore, their idleness or downtime becomes are very expensive.

 Hence, it is very important that the plant machinery should be properly
maintained.
 The main objectives of maintenance management are:
1. To achieve minimum breakdown and to keep the plant in good working
condition at the lowest possible cost.
2. To keep the machines and other facilities in such a condition that permits
them to be used at their optimal capacity without interruption.
3. To ensure the availability of the machines, buildings and services required
by other sections of the factory for the performance of their functions at
optimal return on investment.

 Role and Responsibility of Production/operation Managers in Modern

Business Environment:
 The production manager is the head of the production department.
 He is responsible to the general manager for the accomplishment of the target
output.
 The production manager must necessarily possess the technical knowledge of
the production process.
 He takes the assistance of staff officer, such as the industrial engineer and
production engineer for efficient production.
 His duties are as follows:
1. To prepare the production budget and achieve the budgeted output.
2. To receive work orders from customers and to distribute the same for
execution to the production control department.
3. To design the factory building and equipment in most up-to-date and
efficient operating plant in consultation with the chief engineer.
4. To undertake efficient design, productive efficiency and reduction of the
cost by simplification and standardization.
5. To compare actual results of production with the targeted production and
ascertain how far the target has been attained.
6. To provide the best possible working conditions to the employees in the
production department.
7. To organize a system of periodic meeting of work executives and workers
so as to bring about greater coordination and create a spirit of fullest
cooperation among all.
8. To engage in constant research and development programme so as to
discover new methods of production to minimize wastage and ensure
economical production.

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9. To investigate into actual running time and idle time of the machines as
that would often reveal the weak spots in the production work and thus
strict control could be exercised.
10. To inspect the manufacturing processes, machinery and equipment and to
control the production cost.
11. Industrial relations.
12. Staff selection and liaising.
13. Supply chain management.
14. Equipment maintenance and repair.

 Emerging Role of Operation/Production Manager:

 With the increasing competition the role of operation manager has undergone
a great change.
 The new responsibilities and role of operation manager are:
1. Take part in strategic decisions.
2. Take part in Enterprise resource planning.
3. Automate processes as per requirements.
4. Enhance the R&D activities.
5. Reduce lag in implementation.
6. Following pollution norms.
7. Re-engineering.
8. Develop strategic relations with suppliers.
9. Technological management.
10. Quality certification.

 Importance of Production/Operation Management:

 It is consider as a central point of decision, making in present day in global
competitive business.
 It has multi facet advantage because of which the importance of production is
considered better than the other business operation.
 Following point would help to understand the importance of
production/operation management.
1. It is require producing right type of product which is in accordance with
the requirement of customer.
2. It is required for maximization of output with the help of minimum
available resources.
3. It is essential to ensure that whatever goods & services are manufactured
contains 100% quality standards.
4. It is necessary to have minimization of time required for manufacturing
process.

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5. It is essential to have maximum utilization of different resources as well as
maximum reduction in unwanted expenditures.
 Every aspect of business affects or is affected by operations.
 Operations and sales are the two line functions in a business organization.
 All other functions- accounting, finance, marketing, IT, and so on- support the
two line functions.
 Among the services jobs that are closely related to operations are financial
services, marketing services, accounting services, and information services.
 Because operation management is central to the functioning of every business
organization, it is included in the core of courses business students are
required to take.
 And even though individual courses have narrow focus, in practice, there is
significant interfacing and collaboration among the various functional areas,
involving exchange of information and cooperative decision making.
 For example, although the three primary functions in business organization
perform different activities, many of their decisions impact the other areas of
the organization.

 Objective or Functions of Operations Management:

1. Ultimate Objectives – A) Cost reduction B) Quality improvement C) Follow
time schedule
2. Immediate Objectives – A) Machinery & Equipment B) Materials C) Manpower
D) Manufacturing Services
 Functions of operations management can be broadly categorized into
customer service & resource utilization:

 Customer Service:
 The first objective of operating systems is the customer service to the
satisfaction of customer wants.
 Therefore, customer service is a key objective of operation management.
 The operating system must provide something to a specification which can
satisfy the customer in terms of cost and timing.
 Thus, primary objective can be satisfied by providing the ‘right thing at a
right price at the right time’.
 These aspects of customer service- specification, cost and timing- are
described for four functions.
 They are the principal source of customer satisfaction and must, therefore, be
the principal dimension of the customer service objective for operations
managers.

A) Transport:

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Mode of Transportation:
 Transportation is important in logistics.
 Transportation is one of the most costly of all other activities.
 It involves the part of logistics which deals with the creation of place utility.
 It is concerned with movement of raw materials to the plant and semi-
finished goods or finished goods to the market.
 Problems of the transportation services can lead to a company holding
inventory for several days, more than logistics planned for.
 This increases the inventory carrying cost also decreases the number of times
inventory is converted into cash.
 Thus efficient transportation planning and management is a pre-requisite
function of logistics.
 The five basic modes of transportation are rail, air, road, and pipeline and
waterways.
Water Transport:
 Water transport can be broadly divided into two groups- Inland water
transport and Shipping.
 Shipping, in turn, can again be divided into two categories Coastal shipping
and Overseas shipping.
 Water Transport: shipping is generally considered in case of imports but
inland water transport is also made use of movements of materials within
country from one point to another.
Advantages of Water Transport:
1. Cheapest traffic means.
2. Possesses high load carrying capacity.
3. Requires cheap motor powers than for airlines
4. Does not require any special infrastructure like roads, and airports.
5. Environmental friendly.
Disadvantages of Water Transport:
1. Slow in speed.
2. More chances to attack on boat sailing through.
3. Only can be used when sufficient water is available.
4. Does not work well in water bodies with high drafts.
5. Highly weather susceptible.
Criteria to Ensure an Efficient Water Transport:
1. Navigability
2. Well-planned loading and unloading
Rail Transport:
 India’s railway network is 4th largest in the world and Asia’s foremost
transport system.

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 It is also the largest in movement and transport in terms of tone mileage; in

general rail rates are lower than truck rates for long distance.
 But usually higher than water transport.
 More over a rail transport is more flexible than truck.
 But in reality truck transport is easier because a truck can leave at any time
and arrive at a destination at desired time.
 But rail movements are bounded by time table.
 However railways are ideal for movement of raw materials such as coal, steel,
etc. food grains are also economically handled by railways.
 There is some need based railway transport package offered.
 Quick Transport Service:
 This scheme has been introduced by the Indian Railway to avoid the
misapprehension of under delays.
 On the payment of small surcharge railways guaranteed that consignment
will reach destination within stipulated time.
 In case they fail to reach the surcharge is refunded.
 But this service is still confirmed to main commercial centres only.
 Container Service:
 This is road cum rail transport in container of 5 tones ensuring door to door
delivery.
 This scheme has been introduced to compete with door to door service
catered by road transport companies.
 But the service is still not wide enough to cover all commercial centres.
 Parcel Express:
 Introduction for parcel express for quick transportation of perishable
products and other consignment is also receiving close attention of Indian
Railways.
 In order to successfully compete with road transport.
Advantages of rail transport:
1. As railway require special track there is no problem of traffic.
2. Its movement is fast & cheaper.
3. It is suitable for bulky & heavy goods.
4. Fix time schedules. It thus more certain & uniform.
5. There is no discrimination of class of goods. As a common career will carry all
class of goods.

Disadvantages of rail transport:

1. The costly construction and maintenance.
2. Sophisticated containers and material handling is not available to solve the
problem of loading and unloading.

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3. Rail transport being a large organization delay and negligence are difficult to
locate.
4. The train must have full load for ideal and economic operation.
Road Transport:
 Road transport unlike rail transport the user can constructs carrier as well as
common carriers for short distance.
 Even for long distance truck usually gives rapid movement service as they
operate on flexible schedule.
 Leaving and arriving according to customer needs.
 Moreover, service area flexibility is more in road then in rail.
 There are a large number of road transport organization operating in the
country are ideally fit for transport of the order of 5 tonnes to 15 tonnes over
both short and long distance.
 Since it road transport is fastest inland transport in India government also
support this movement.
Advantages of road transport:
1. Road transport is generally preferred and suitable for, short or medium
distance, Expensive and non-bulky goods, perishable and breakable goods,
etc.
2. Delivery can be directly made to customer premises.
3. Routes and schedule are more flexible and can be adjusted according to
individual needs.
4. The manufacturers are producing specialized vehicles of great variety; low
capital requirement is special feature of road transport.
Disadvantages of Road Transport:
1. It is costly over long distance. It is unsuitable for heavy and bulky goods.
2. Like railway it cannot provide regularity and punctuality like rail route.
3. Due to heavy traffic on the road speed of vehicle cannot increased.
Air Transport:
 This is faster and most expensive mode of transport and is subject to
constraint of limited port facilities and depends on other modes for pickup
and delivery.
 Speed of movement is the primary advantage of air transport.
 But it is only suitable for high value and highly perishable products.
 Sometime the speed advantage may reduce overall costs on the inventories to
be maintained and this means less warehousing services.
Advantages of Air Transport:
1. It provides regular, efficient and quick services.
2. It is quite suitable for caring goods with normal bulk in small quantities.
3. Customer formalities can be quickly complied with thus delay in obtaining
clearance is reduced.

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Disadvantages of Air Transport:
1. Cost of operation and maintenance of airport are heavy.
2. It cannot carry bulk commodities at large scale.
3. Chances of breakdowns and accidents are frequent. On the fact that all the
technical aspects of air transport have yet to be exploited.
4. It is costly for goods transport.
Pipeline:
 The liquid products like petrol, oil, gases etc can be easily transport through
pipelines from the oil wells to the refineries.
 Big customers too many be served by pipelines.
 The cost and maintenance is very high but it saves on motor vehicle and
avoids conjunctions on high ways.
 It is economical and socially also desirable for transporting oil & natural
gases.

B) Supply:
 Supply is network of different entities that collectively integrate in various
activities like procurement, manufacturing, distribution and servicing in
order to deliver the require products and customer to the end customers.
 Objectives of Supply: the main objective of supply chain management is too
made available to the right place at right time for customer to pick up.
 While other perspective of supply is to reduce costs to present on time
delivery, and thus maximise profits.
1. Right Product:
 A standard product is the product according to customer specifications.
 Product with slight variations in specification becomes another stock
keeping unit.
 For example, a car without accessories is the standard product, a stock
keeping unit dealer to handle.
 The same car with different version where some components are different
i.e., power staring, and locking become different store keeping unit for
dealer.
2. Right Place:
 In our study of supply the right place means this place where and customer
would exchange money for the product received.
 In case when customer buys fast moving consumer goods the right place
would be retailer where the customer visits for purchasing.
 Sem has to ensure delivery of final products at proper place.
3. Right time:

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 When we talk of products that are purchased by industrial buyers the

terms like lead times, percentage on time deliveries, storage of production
due to delay in delivery of one component are the key concern areas.
 In Indian context such seasonal fluctuation demand is also associated with
specific days and religious events.
 Products there are purchased on specific occasion have to be available just
during the peak season for e.g., greeting card for specific occasion like
Diwali, birthday etc.
 If the inventory would have slightly late than the inventory would have to
be carried for next 36 days.
4. Reliability:
 The entities involved in the supply have pre-defined lead times to perform
certain objectives.
 The reliability of the entity in comforting to this pre-defined timed become
a key consideration in ensuring timely availability of materials.
 The reliability assumes critical importance if the number of entities
involved is more for e.g., if the material is not procured in schedule time
has to suffer a loss of on total cost.
5. Cost:
 The cost associated with supply acquires significance especially in the ever
increasing competitive environment customers are becoming price
conscious.
 In such a situation there is a constant pressure on cost reduction without
compromising on quality.
 Supply is related to cost of transportation, warehousing and logistics.
 So cost reduction is an important element of supply.

C) Services:
 The guarantee of supply is an important service consideration.
 Generally it can be said that supply is more assured when a company
makes as item that when it buys it.
 Assumed supply to the assembly line is often a reason for making rather
than buying.
 Such decisions are valid for large industrial concerns where uninterrupted
supply is necessary.
 The more consideration is about the effect of the make or buy on the buyers
flexibility while purchasing negotiations with various suppliers are
possible and suppliers can be selected as the occasions demands to get the
right quality, quantity, at the right time and for right place.

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ALL THE VERY BEST FOR YOUR BRIGHT FUTURE

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